Company Achieves Record Revenues and Net Income; Q3 Revenues
Increase 32% Year-Over-Year SAN JOSE, Calif., Oct. 24
/PRNewswire-FirstCall/ -- Endwave Corporation (NASDAQ:ENWV), a
leading provider of high frequency RF modules for
telecommunications networks, defense electronics and homeland
security systems, today reported financial results for its third
quarter ended September 30, 2006. Revenues were $18.8 million for
the third quarter of 2006, compared with $14.3 million for the
third quarter of 2005 and $16.3 million for the second quarter of
2006. Net income, calculated in accordance with accounting
principles generally accepted in the United States (GAAP), for the
third quarter of 2006 was $911,000, or $0.06 per diluted share,
compared with net loss for the third quarter of 2005 of $193,000,
or $0.02 per share, and net loss for the second quarter of 2006 of
$207,000, or $0.02 per share. Non-GAAP net income for the third
quarter of 2006 was $2.0 million, or $0.14 per diluted share,
compared with non-GAAP net income for the third quarter of 2005 of
$732,000, or $0.06 per diluted share, and non-GAAP net income for
the second quarter of 2006 of $915,000, or $0.06 per diluted share.
For the third quarter of 2006, non-GAAP net income was calculated
by excluding amortization of intangible assets of $152,000,
non-cash stock-based compensation expense of $878,000 incurred as a
result of the company's adoption of SFAS 123R, and loss on sale of
assets of $84,000 related to the relocation of company
headquarters. For the third quarter of 2005, non-GAAP net income
was calculated by excluding the expensing of transaction costs for
a withdrawn secondary offering of $773,000 and amortization of
intangible assets of $152,000. For the second quarter of 2006,
non-GAAP net loss was calculated by excluding amortization of
intangible assets of $150,000 and non- cash stock-based
compensation expense of $972,000 incurred as a result of the
company's adoption of SFAS 123R. Cash, cash equivalents and
short-term investments as of September 30, 2006 were $66.7 million,
compared with $67.0 million at June 30, 2006. "We experienced
record revenues and profits this quarter based on strong customer
demand for our mobile infrastructure products," said Ed Keible,
Endwave's Chief Executive Officer and President. "In addition,
non-telecom revenues increased 15 percent sequentially due to
increased sales for our high-frequency defense and homeland
security sub-systems." Third Quarter Highlights: -- Revenues were
$18.8 million for the third quarter of 2006, up 32% compared with
the year ago period, and up 15% compared with the second quarter of
2006. -- Revenues attributable to customers in telecom markets were
approximately $16.5 million; revenues attributable to customers in
defense electronics, homeland security and other non-telecom
markets were approximately $2.4 million. -- GAAP gross margin was
31%, and non-GAAP gross margin was 33%. Non-GAAP gross margin was
adjusted for amortization of intangible assets and non-cash
stock-based compensation expense. -- The largest customers in the
third quarter were Nera, Nokia and Siemens. -- For the first nine
months of 2006, revenues were $48.9 million, a 37% increase over
the first nine months of 2005. -- The company began production of
the complete RF mast system for L-3 SafeView's security portal
scanner. Conference Call Endwave Corporation will hold a conference
call to discuss the company's financial results today, at 1:30 p.m.
Pacific Time. Those wishing to join should dial (913) 981-5523 and
enter the pass code "Endwave." A replay of the call will be
available approximately one hour following the conclusion of the
call until October 27. To access the replay, dial (719) 457-0820
(pass code 4329974). A live and an archived webcast will also be
available via the company's Web site. About Endwave Endwave
Corporation designs, manufactures and markets RF modules that
enable the transmission, reception and processing of high-frequency
signals in telecommunications networks, defense electronics and
homeland security systems. These RF modules include high-frequency
integrated transceivers, amplifiers, synthesizers, oscillators, up
and down converters, frequency multipliers and microwave switch
arrays. Endwave has 39 issued patents covering its core
technologies including semiconductor and proprietary circuit
designs. Endwave Corporation is headquartered in San Jose, CA, with
operations in Diamond Springs, CA; Andover, MA; and Chiang Mai,
Thailand. Additional information about the company can be accessed
from the company's web site at http://www.endwave.com/ . Use of
Non-GAAP Financial Information To supplement the company's
consolidated financial statements presented in accordance with
accounting principles generally accepted in the United States
(GAAP), Endwave uses certain measures of financial performance that
are non- GAAP financial measures within the meaning of Regulation G
promulgated by the Securities and Exchange Commission. These
non-GAAP measures include gross margin, net income (loss) and net
income (loss) per share data that are adjusted from results based
on GAAP to exclude certain expenses, gains and losses. These
non-GAAP measures are provided to enhance investors' overall
understanding of the company's current financial performance and
the company's prospects for the future. Specifically, Endwave
believes the non-GAAP measures provide useful information to both
management and investors by excluding certain expenses that may not
be indicative of its core operating results. These measures should
be considered in addition to results prepared in accordance with
GAAP, but should not be considered a substitute for, or superior
to, GAAP results. These non-GAAP measures included in this press
release have been reconciled to the GAAP results in the attached
tables. "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995: This press release and the
conference call referred to in this press release may contain
forward-looking statements within the meaning of the Federal
securities laws and is subject to the safe harbor created thereby.
Any statements contained in this press release or on the conference
call that are not statements of historical fact may be deemed to be
forward-looking statements. Words such as "plans," "intends,"
"expects," "believes" and similar expressions are intended to
identify these forward-looking statements. Information contained in
forward-looking statements is based on current expectations and is
subject to change. Actual results could differ materially from the
forward-looking statements due to many factors, including the
following: our ability to achieve revenue growth and maintain
profitability; our customer and market concentration; our
suppliers' abilities to deliver raw materials to our specifications
and on time; our successful implementation of next-generation
programs, including inventory transitions; our ability to penetrate
new markets; fluctuations in our operating results from quarter to
quarter; our reliance on third-party manufacturers and
semiconductor foundries; acquiring businesses and integrating them
with our own; component, design or manufacturing defects in our
products; our dependence on key personnel; and fluctuations in the
price of our common stock. Forward-looking statements contained in
this press release and on our conference call should be considered
in light of these factors and those factors discussed from time to
time in Endwave's public reports filed with the Securities and
Exchange Commission, such as those discussed under "Risk Factors"
in Endwave's most recent Annual Report on Form 10-K, and
subsequently-filed reports on Form 10-Q. Endwave does not undertake
any obligation to update such forward- looking statements. Contact:
Mary McGowan Summit IR Group Inc. 408-404-5401 CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) September
30, December 31, 2006 2005 Assets Current assets Cash and cash
equivalents $31,030 $8,456 Short-term investments 35,658 13,959
Accounts receivables, net 12,822 10,487 Inventories 15,298 13,448
Other current assets 530 560 Total current assets 95,338 46,910
Property and equipment, net 1,941 1,321 Other assets 133 97
Restricted cash 261 25 Goodwill and intangible assets, net 4,342
4,796 Total assets $102,015 $53,149 Liabilities and stockholders'
equity Current liabilities: Accounts payable $5,556 $2,954 Warranty
accrual 2,973 3,257 Accrued compensation 3,120 2,494 Other accrued
liabilities 1,150 976 Total current liabilities 12,799 9,681 Other
long-term liabilities 269 385 Total stockholders' equity 88,947
43,083 Total liabilities and stockholders' equity $102,015 $53,149
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except share and per share amounts) (unaudited) Three months ended
Nine months ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2006 2005
2006 2005 Total revenues $18,836 $14,320 $48,908 $35,662 Costs and
expenses: Cost of product revenues 12,815 9,669 34,245 23,803 Cost
of product revenues, amortization of intangible assets 113 113 337
339 Research and development 2,389 1,708 6,579 4,819 Selling,
general and administrative 3,353 2,386 9,845 7,119 Transaction
costs -- 773 -- 773 Amortization of intangible assets 39 39 117 140
Restructuring charges, net -- -- -- (46) Total costs and expenses
18,709 14,688 51,123 36,947 Income (loss) from operations 127 (368)
(2,215) (1,285) Interest and other income, net 784 175 1,741 563
Net income (loss) $911 $(193) $(474) $(722) Basic net income (loss)
per share $0.08 $(0.02) $(0.04) $(0.07) Diluted net income (loss)
per share $0.06 $(0.02) $(0.04) $(0.07) Weighted shares used in
basic per share calculation 11,436,417 11,078,344 11,403,728
10,752,423 Weighted shares used in diluted per share calculation
14,676,969 11,078,344 11,403,728 10,752,423 NON-GAAP CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (1) (in thousands, except
share and per share amounts) (unaudited) Three months ended Nine
months ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2006 2005 2006
2005 Total revenues $18,836 $14,320 $48,908 $35,662 Costs and
expenses: Cost of product revenues 12,695 9,669 33,911 23,803
Research and development 2,260 1,708 6,170 4,819 Sales, general and
administrative 2,724 2,386 8,024 7,119 Total costs and expenses
17,679 13,763 48,105 35,741 Income (loss) from operations 1,157 557
803 (79) Interest and other income, net 868 175 1,825 563 Net
income (loss) $2,025 $732 $2,628 $484 Basic net income (loss) per
share $0.18 $0.07 $0.23 $0.05 Diluted net income (loss) per share
$0.14 $0.06 $0.19 $0.04 Weighted average shares used in basic per
share calculation 11,436,417 11,078,344 11,403,728 10,752,423
Weighted average shares used in diluted per share calculation
14,780,725 11,856,369 13,515,196 11,358,463 Basis of presentation:
1. Non-GAAP operating results exclude amortization of intangible
assets, loss on sale of fixed assets related to the relocation of
our corporate headquarters, transaction costs, restructuring
charges, and non-cash 2006 stock compensation expense. GAAP TO
NON-GAAP NET LOSS RECONCILIATION (in thousands) (unaudited) Three
months ended Nine months ended Sept. 30, Sept. 30 Sept. 30, Sept.
30 2006 2005 2006 2005 GAAP net income (loss) $911 $(193) $(474)
$(722) Cost of product revenues, amortization of intangible assets
113 113 337 339 Cost of product revenues, stock-based compensation
expense 120 -- 334 -- Amortization of intangible assets 39 39 117
140 Restructuring charges, net -- -- -- (46) Loss on sale of assets
84 -- 84 -- Transaction costs -- 773 -- 773 Research and
development, stock-based compensation expense 129 -- 409 --
Selling, general and administrative, stock-based compensation
expense 629 -- 1,821 -- Non-GAAP net income $2,025 $732 $2,628 $484
DATASOURCE: Endwave Corporation CONTACT: Mary McGowan of Summit IR
Group Inc., +1-408-404-5401, or , for Endwave Web site:
http://www.endwave.com/
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