P Rospectus S Ummary
PROSPECTUS SUMMARY This summary highlights the information contained elsewhere in this prospectus and is a brief overview of the key aspects of the offering. Because this is only a summary, it does not contain all of the information that may be important to you. Before investing in our common stock, you should read this entire prospectus, including the information set forth under the headings “Risk Factors,” Selected Historical Consolidated Financial and Operating Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Business” and our consolidated financial statements and related notes thereto. Some of the statements in this prospectus constitute forward-looking statements. Please read “Special Note Regarding Forward-Looking Statements” for more information. For a description of some key mobile communications industry terms used in this summary and elsewhere in this prospectus, please read “Description of Key Terms Used in Our Industry” elsewhere in this prospectus.Unless the context otherwise requires, references in this prospectus to “Mavenir Systems,” “Mavenir,” “we,” “our,” “us,” and the “company” refer to Mavenir Systems, Inc. together with its subsidiaries.
MAVENIR SYSTEMS, INC.
Overview
We are a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver internet protocol (IP)-based voice, video, rich communications and enhanced messaging services to their subscribers globally. Our solutions deliver Rich Communication Services (RCS), which enable enhanced mobile communications, such as group text messaging, multi-party voice or video calling and live video streaming as well as the exchange of files or images, over existing 2G and 3G networks as well as next generation 4G Long Term Evolution (LTE) networks. Our solutions also deliver voice services over LTE technology and wireless (Wi-Fi) networks, known respectively as Voice over LTE (VoLTE) and Voice over Wi-Fi (VoWi-Fi). We enable mobile service providers to offer services that generate increased revenue and improve subscriber satisfaction and retention, while allowing them to improve time-to-market of new services and reduce network costs. Our mOne® Convergence Platform has enabled leading mobile service providers to introduce the industry’s first live network deployment of VoLTE and the industry’s first live deployment of next-generation RCS 5.
The capabilities of smartphones and tablets have caused consumers to shift their communication preferences from traditional voice service to a combination of voice, video and messaging services, which are offered by rich communication services. Additionally, many consumers are using their mobile devices to browse the internet, run software applications, access cloud-based services and consume, create and share rich multimedia and user-generated content. These trends have placed substantial capacity constraints on the existing networks of mobile service providers. According to the February 2013 Cisco Visual Networking Index report, the average smartphone and tablet generate 50 and 120 times more data traffic, respectively, than the average basic-feature cell phone. As a result, mobile data traffic is projected to continue to increase exponentially, driven by the rapid adoption of smartphones and tablets and the demand for enhanced and high-bandwidth mobile services such as video. In order to alleviate the resulting spectrum and network capacity challenges, mobile service providers are making significant investments to transition their networks to the 4G Long Term Evolution (4G LTE) standard for voice and data transmission over mobile networks, as that standard enables higher data speeds and allows more efficient use of the frequency spectrum. In a September 2013 report, Gartner estimated that worldwide annual spending on 4G LTE mobile infrastructure would grow from $5.9 billion in 2012 to $33.9 billion by 2017, representing a compound annual growth rate (CAGR) of 42%. (Source: Gartner, Forecast: Carrier Network Infrastructure, Worldwide, 2010–2017 3Q13 Update, September 2013.)
Because our solutions are interoperable across network generations, we enable mobile service providers to leverage their existing investments in 2G and 3G networks while offering a seamless, cost-effective migration path to 4G LTE networks. We provide our solutions to over 120 mobile networks globally, including three of the top five mobile service providers in the United States and four of the top five pan-European mobile service providers in Western Europe, as measured by number of mobile device connections as of December 2012. Our end customers include AT&T, MetroPCS (now part of T-Mobile), T-Mobile USA, Vodafone, Tele2, Deutsche Telekom AK and Telstra. Our customers include the first mobile service providers to deploy VoLTE and RCS 5 services to their subscribers, which services were deployed utilizing our technology. Our solutions can be deployed on-premise within the mobile service provider’s network or hosted in a mobile cloud environment. Our solutions enable mobile service providers to generate additional revenues by providing their subscribers with rich communications and cloud-based services, including:
We commenced operations in 2005 and began product sales in 2007. Our unaudited pro forma 2011 revenue, which assumes a full-year contribution from Airwide Solutions, Inc. (Airwide Solutions), a business we acquired in May 2011, was $66.8 million. For the year ended December 31, 2012, our reported revenue was $73.8 million, compared with $49.5 million and $8.3 million for the years ended December 31, 2011 and 2010, respectively. In addition, our operating loss was $(14.6) million, $(19.2) million and $(10.2) million for the years ended December 31, 2012, 2011 and 2010, respectively. For the six months ended June 30, 2013 and 2012, our reported revenue was $48.2 million and $39.9 million, respectively, and operating loss was $(2.6) million and $(4.5) million, respectively. We are headquartered in Richardson, Texas and had approximately 670 full-time employees worldwide as of June 30, 2013.
Industry Background
The market for mobile communications services is evolving rapidly, characterized by the following trends:
Proliferation of Smartphones and Tablets. Global adoption of smartphones and tablets is in its early stages, and future growth is expected to accelerate as mobile subscribers increasingly rely on these powerful devices. Despite increased usage of smartphones, a June 2013 Ericsson publication estimated that smartphones accounted for only 19% of total global mobile subscriptions, highlighting the potential for growth in smartphone usage.
Increased Use of Mobile Applications, Mobile Media and Cloud-Based Services. Powerful smartphones and tablets are rapidly replacing desktop computers and laptops as the primary computing platform used for browsing the internet, running software applications, accessing cloud-based services, and consuming media content such as streaming video and internet radio. Also, many consumers are increasingly creating, sharing and accessing user-generated content, such as photos and videos, on their mobile devices through online services such as Facebook and YouTube. In addition, cloud-based storage is growing significantly as consumers purchase content from media services, such as Amazon, Apple and Google, and utilize online storage services to access their purchased content from multiple mobile device types. Furthermore, mobile subscribers are increasingly seeking more rich communication services, such as video chat, to enhance the communications experience on their mobile devices. These trends in consumer behavior related to mobile device usage are driving a substantial increase in the amount of mobile data traffic.
Mobile Service Provider Challenges
Proliferation of smartphones and tablets as well as increased use of mobile applications and cloud-based services by subscribers present the following challenges for mobile service providers:
Benefits of 4G LTE
The next generation of mobile technology, broadly defined as 4G, includes Long Term Evolution (LTE), Worldwide Interoperability Microwave Access (WiMAX) and Evolved High Speed Packet Access (HSPA+) and can be extended to include Wi-Fi. 4G LTE has been developed to handle mobile data more efficiently and allows for faster, more reliable and more secure mobile service than existing 2G and 3G networks. The faster data transfer capabilities of 4G LTE networks enable mobile subscribers to use a wide variety of bandwidth-intensive software applications and cloud-based services with a rich mobile computing experience. In addition to the benefits for mobile subscribers, 4G LTE technology is inherently more efficient and cost-effective, resulting in a better network infrastructure for mobile service providers.
4G LTE offers the opportunity to fundamentally lower the cost of network operational centers by leveraging technologies widely used in the IT industry, such as Network Functions Virtualization (NFV), which refers to the deployment of telecommunications application software on virtualized hardware platforms often referred to as “private clouds,” and Software-Defined Networking (SDN), which simplifies network administration through the use of software. Both of these technologies drive down network cost and complexity and increase network flexibility and responsiveness.
4G LTE is a new architecture that enables mobile service providers to offer a wide range of new and innovative services across their networks. Mobile service providers can deliver device independent services over 4G LTE networks and offer a cloud-based subscriber experience that is comparable to communication services providers such as Apple, Google and Skype. Mobile service providers will be able to offer a platform that third-party application developers can leverage to integrate new and innovative services through open network standards.
Market Opportunity
The development of 4G LTE is a generational change in technology for the mobile industry, a level of change that occurs approximately every ten years on average. Every generational change spurs a new investment cycle as mobile service providers seek to invest in equipment upgrades to support new standards. In the transition of communication services from 2G and 3G to 4G LTE, a complete change of infrastructure to deliver new services is required. Unlike 3G, migration to the next-generation 4G LTE standard is no longer an option, but rather a time-critical business priority for many mobile service providers.
Many mobile service providers are currently making the needed infrastructure investments to accommodate the growing subscriber demand for next-generation mobile communication services. A September 2013 Gartner report estimated that next-generation 4G LTE mobile infrastructure spending worldwide was $5.9 billion in 2012 and is forecast to reach $33.9 billion by 2017, representing a 42% CAGR. (Source: Gartner, Forecast: Carrier Network Infrastructure, Worldwide, 2010-2017 3Q13 Update, September 2013.) We believe 4G LTE network investments will accelerate as mobile service providers seek to meet growing subscriber demand.
Our Solutions
Our solutions, based on our mOne® Convergence Platform, enable mobile service providers to deliver IP-based voice, video, rich communications and enhanced messaging services over their existing 2G and 3G networks and next-generation 4G LTE networks. IP-based communication services, which involve the transmission of voice and text data using the more efficient internet protocol that underlies the internet, rather than through traditional and less efficient circuit-switched phone networks, are being developed and deployed today. These services are faster, more efficient and demand less spectrum than the circuit-based communication methods employed by existing 2G and 3G networks.
Our solutions are focused on delivering a seamless and intuitive communications experience to mobile subscribers and an integrated, flexible, differentiated platform for mobile service providers. We enable mobile service providers to capitalize on their IP-based network investments by efficiently and cost-effectively offering a broad range of services.
Our mOne® Convergence Platform offers our customers the following key benefits:
Comprehensive, Highly Configurable and Converged Communication Solution. The mOne® Convergence Platform enables mobile service providers to deploy any or all of a wide range of services. Some of these services include:
Cloud-Based Implementation. The design of our software products enables mobile service providers to use private cloud implementations to deliver next generation mobile communications, including voice, video, enhanced messaging and storage of mobile subscriber content and media. These solutions allow our customers to share capacity in a cloud deployment with commercial off-the-shelf servers for all services rather than deploying dedicated, proprietary hardware for each service. The key benefits of utilizing private clouds include more agile use of the network infrastructure, the ability to deploy and prove-in new services rapidly using commercially available off-the-shelf hardware available from major manufacturers, combined with our software, without large up-front infrastructure costs and avoiding the network upgrade costs associated with obsolescence of proprietary hardware. For example, one of the largest pan-European mobile service providers has commercially launched our virtualized Rich Communication Services (RCS) to provide joyn® — an industry initiative that enables one-on-one and group chat services and the enhancement of voice calls through the sharing of multi-media content such as videos, pictures and music — on its own single common hardware platform for nine different national networks across the continent, thereby deploying its own mobile cloud environment. Although we offer to host our solutions in our own cloud-computing center for mobile service providers, we do not currently have any contracts to provide cloud-based hosting services.
Seamless Migration Path to 4G LTE. Our solutions offer mobile service providers a cost-effective migration path to 4G LTE by supporting existing 2G and 3G networks and next-generation 4G LTE networks, eliminating the need to prematurely retire existing investments. Our platform features a comprehensive, standards-based set of interfaces to ensure a seamless integration into existing, multi-vendor infrastructure and can be deployed over a wide range of network types including 2G, 3G, LTE, WiMAX, HSPA+ and Wi-Fi.
Ability to Improve Subscriber Experience and Deliver Revenue-Generating Services. Mobile service provider competition continues to exert downward pressure on the prices and profits associated with traditional voice, SMS and data services. When a mobile service provider offers a rich communications platform with multiple high-value services, its subscribers will be more likely to pay for these services, either by direct subscription or through increased data revenue, and less likely to switch providers.
Scalable Architecture and Carrier-Grade Reliability. Our solutions form a highly scalable carrier-grade platform that provides subscribers with high-quality service, as measured by the breadth of services offered and reliability, or lack of downtime. Our platform is fully compatible with the mobile industry’s standards and interoperability framework, allowing full compatibility across mobile service providers and geographies. Unlike OTT service providers, who cannot control quality or reliability of service because they do not own or control underlying access networks, mobile service providers using our solutions over their networks can deliver high-quality and consistent service to all subscribers.
Open Platform and Social Interworking. Our standards-based open solution architecture and APIs (Application Programming Interfaces) allow mobile service providers to develop or incorporate third-party enhanced application services (social or otherwise), for example, by embedding messaging or voice calling capabilities within consumer applications such as shopping or banking applications. We enable mobile service providers to interconnect various OTT applications and social networking services so that a subscriber can engage in voice, video and rich messaging communications with anyone, anywhere, on any device or in any communications ecosystem. A subscriber can communicate with another subscriber through one central identity based on the subscriber’s mobile phone number, rather than having to worry about what specific application to use to connect with that other subscriber. Mobile service providers can leverage this neutral position and technology to bring more users into their networks.
Our Competitive Strengths
We are a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver carrier-grade integrated communications services to their subscribers because we have been first to market with solutions that enable many enhanced subscriber services, we have a broad customer base and we have a history of successfully competing for business with some of the largest solutions providers in the mobile industry. Our competitive strengths include the following:
Our Strategy
Our goal is to establish our position as the leading global provider of 4G LTE solutions. Key elements of our strategy include:
RCS 5, which is an advanced set of standards enabling the delivery of mobile communications services such as group text messaging, multi-party voice or video calling and live video sharing as well as the exchanging of files or images. We believe that the experience and detailed technical knowledge that our employees obtained during the course of enabling a mobile service provider to launch these first-to-market services will be directly applicable to expanding existing customer networks, as well as new customer networks, with our next-generation solutions. We intend to further capitalize on our early market success in deploying next-generation 4G LTE solutions and the strong customer relationships we have to supply our existing customers with new product offerings and gain new customers.
Risks Affecting Our Business
Our business is subject to a number of risks that you should consider before making a decision to invest in our common stock. These risks are discussed more fully in the “Risk Factors” section of this prospectus. These risks include, but are not limited to, the following:
Corporate Information
Our company was originally formed as a Texas limited liability company in April 2005. We converted to a corporation in August 2005, and we changed our jurisdiction of incorporation to Delaware in March 2006. Our principal executive office is located at 1700 International Parkway, Suite 200, Richardson, TX 75081 and our telephone number is (469) 916-4393. Our website address is http://www.mavenir.com. The information contained in or accessible from our website is not incorporated into this prospectus, and you should not consider it part of this prospectus.
The “Mavenir Systems®” name, the “mOne®” name, the “Airwide®” name, the “AirMessenger®” name, the “Mavenir™” name, the “mStore™” name, the “mCloud™” name, “Transforming Mobile Networks™” and related images, logos and symbols appearing in this prospectus are our properties, trademarks and service marks. Other marks appearing in this prospectus are the property of their respective owners.