Strong Sequential Growth in Revenue,
Operating Profit, and EBITDA
Pulse Electronics Corporation (NYSE:PULS), a leading provider of
electronic components, today reported results for its second
quarter ended June 27, 2014.
Second Quarter
Highlights
- Net sales were $93.6 million, up 6.0
percent from $88.3 million in the prior-year quarter, and up 14.6
percent from $81.7 million in the first quarter.
- Operating profit (U.S. GAAP) was $1.7
million compared with a profit of $1.6 million in the prior-year
quarter and a loss of $1.4 million in the first quarter.
- Non-GAAP operating profit was $2.9
million, compared with $2.2 million in the prior-year quarter and
$0.1 million in the first quarter.
- Adjusted EBITDA was $4.8 million,
compared to $4.0 million in the prior-year quarter and $1.9 million
in the first quarter. As a percentage of revenue, Adjusted EBITDA
margin was 5.1 percent, compared to 4.6 percent in the prior-year
quarter and 2.3 percent in the first quarter.
- Completed the company’s financial
restructuring with redemption of remaining convertible notes.
CEO Comments
“Our operating results in the second quarter for revenue and
non-GAAP operating profit were higher both sequentially and
year-over-year, as we expected based on the strength in industry
demand we experienced in the first quarter,” said interim Chief
Executive Officer Alan Benjamin. “Shipments in key network and
power product lines were strong following higher order rates coming
into the quarter, and higher demand in our smartphone programs
bolstered revenue in the wireless segment.
“Pulse’s overall strategy remains unchanged: we continue to
focus on aggressive EBITDA growth through margin improvement, cost
and expense reductions, and growth in new channels. This quarter’s
increase in EBITDA margin demonstrates our ability to generate good
growth in EBITDA with increases in revenue,” Mr. Benjamin
continued. “We will continue to pursue cost and expense reductions
in the third quarter with the objective of further improving our
EBITDA margin.
“We saw improvements in our wireless segment this quarter,”
added Mr. Benjamin. “Higher demand for our existing products
compared to the first quarter improved capacity utilization,
resulting in higher operating margins despite increasing industry
price pressure. Additionally, the new antenna manufacturing
technology we discussed last quarter gained traction with our
customers, and we look forward to this exciting technology adding
to the segment’s operating results in future quarters.
“Entering the third quarter, we see demand across our business
segments continuing at levels roughly in line with the second
quarter,” concluded Mr. Benjamin.
Second Quarter Operating
Performance
Net sales were $93.6 million compared to $88.3 million in the
prior-year quarter due to broadly increased demand across key
markets and customers in all segments. Increased order rates for
network and power in the first quarter resulted in strong shipments
in the second quarter, and demand for wireless products in both the
consumer and infrastructure markets increased over the prior year.
Sequentially, net sales increased 14.6 percent compared to first
quarter net sales of $81.7 million due primarily to improved market
demand and normal seasonality.
Cost of sales increased 9.4 percent to $73.8 million from $67.5
million in the prior-year quarter. The company’s gross profit
margin was 21.1 percent compared with 23.5 percent in the
prior-year quarter and 21.5 percent in the first quarter. Gross
profit margin decreased compared to the prior year mainly due to
lower market prices for consumer wireless products and higher
production costs, particularly labor costs in China, partially
offset by manufacturing efficiency improvement initiatives.
Sequentially, gross margin declined slightly mainly due to product
mix and higher labor costs.
Operating expenses were $17.0 million, a decline of 10.4 percent
from the second quarter of 2013, mainly due to results of actions
related to the previously announced expense reduction initiative.
Operating expenses decreased 5.0 percent sequentially as certain
cost reductions were implemented and achieved full effect.
Operating profit (U.S. GAAP) was $1.7 million compared with $1.6
million in the second quarter of 2013, mainly due to lower
operating expenses offset by $1.0 million of severance costs in the
current-year quarter associated with production cost and operating
expense reductions. Non-GAAP operating profit was $2.9 million
compared with $2.2 million in the prior-year quarter and $0.1
million in the first quarter.
The company had $24.8 million of cash and cash equivalents at
June 27, 2014 compared with $26.9 million at December 27, 2013. The
decrease in cash mainly reflects the payment of cash consideration
for the previously announced convertible bond exchange
transactions, refinancing transaction fees and expenses, and
capital expenditures, partially offset by temporary reductions in
working capital. Additionally, in the second quarter the company
redeemed the remaining senior convertible notes outstanding after
the exchange transaction for $1.6 million in cash. As a result, all
of the company’s debt is now comprised of long-term loans which
mature in late 2017.
Conference Call
The company will conduct a conference call at 5:00 p.m. Eastern
Time (2:00 p.m. Pacific Time) today. The conference call will be
available via telephone and the Internet. The dial-in number is
1-800-860-2442 (international 1-412-858-4600). A link to the
earnings press release, the Internet web cast and a slide
presentation that will accompany management’s prepared remarks will
be available on the “Investor Relations” section of the company’s
web site www.pulseelectronics.com for two weeks.
About Pulse Electronics
Corporation
Pulse Electronics is a leading electronic components partner
that helps customers build the next great product by providing the
needed technical solutions. Pulse Electronics has a long operating
history of innovation in magnetics, antennas and connectors, as
well as the ability to ramp quickly into high-quality, high-volume
production. The company serves the wireless and wireline
communications, power management, military/aerospace and automotive
industries. Pulse Electronics is a participating member of the
IEEE, SFF, OIF, HDBaseT Alliance, CommNexus, and MoCA. Visit the
Pulse Electronics website at www.pulseelectronics.com.
Safe Harbor
This press release contains statements, including projections of
future business objectives and financial results, that are
"forward-looking" within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve a number of risks and
uncertainties. These forward-looking statements are based on the
company's current information and expectations. There can be no
assurance these forward-looking statements will be achieved. Actual
results may differ materially due to the risk factors listed from
time to time in the company's SEC reports including, but not
limited to, those discussed in its Current Reports on Form 8-K,
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. All
such risk factors are incorporated herein by reference as though
set forth in full. The company undertakes no obligation to update
any forward looking statement.
Non-GAAP Measures
In this press release and in other public statements, Pulse
presents certain non-GAAP financial measures. These non-GAAP
financial measures have limitations and may not be comparable with
similar non-GAAP financial measures used by other companies and
should not be considered in isolation from, or as a substitute for,
financial information prepared in accordance with GAAP. Set forth
in Schedule A are the reconciliations of the non-GAAP financial
measures to their most directly comparable GAAP financial measures.
These reconciliations should be carefully evaluated. Prior
disclosures of non-GAAP figures may not exclude the same items and
as such should not be used for comparison purposes. Management
believes that these measures enhance investors' understanding of
the company's financial performance and the comparability of the
company's operating results to prior periods, as well as against
the performance of other companies.
Copyright © 2014 Pulse Electronics Corporation. All rights
reserved. All brand names and trademarks are properties of their
respective holders.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) (in thousands, except per-share data) Three Months
Ended Six Months Ended
6/27/14
6/28/13 6/27/14
6/28/13 Net sales $ 93,567 $
88,258 $ 175,219 $ 173,064 Cost of sales
73,830
67,508
137,956 132,133
Gross profit 19,737 20,750 37,263 40,931 Operating expenses 17,026
19,008 34,948 38,182 Severance, impairment and other associated
costs 976 93 1,937 112 Legal reserve
11
37 22
75 Operating profit 1,724 1,612 356 2,562
Interest expense, net (6,361 ) (6,774 ) (13,479 ) (11,888 )
Other income (expense), net
318
(408 ) 245
(2,940 ) Loss before income taxes
(4,319 ) (5,570 ) (12,878 ) (12,266 ) Income tax (expense) benefit
(3,520 ) 349
(3,992 )
(84 ) Net loss (7,839 ) (5,221 ) (16,870
) (12,350 ) Less: Net (loss) earnings attributable to
non-controlling interest
(30 )
9 (16 )
(5 ) Net loss attributable to
Pulse Electronics Corporation $ (7,809 ) $ (5,230 ) $ (16,854 ) $
(12,345 ) Basic shares outstanding 17,322 7,994 14,992 7,976
Basic loss per share (0.45 ) (0.65 ) (1.12 ) (1.55 ) Diluted
shares outstanding 17,322 7,994 14,992 7,976 Diluted loss per share
(0.45 ) (0.65 ) (1.12 ) (1.55 )
BUSINESS SEGMENT INFORMATION (UNAUDITED) (in thousands) Three
Months Ended Six Months Ended
6/27/2014
6/28/2013 6/27/2014
6/28/2013 Net Sales Network $
42,157 $ 38,454 $ 77,099 $ 74,285 Power 28,086 29,554 54,573 57,139
Wireless
23,324
20,250 43,547
41,640 Total net sales 93,567 88,258 175,219
173,064 Operating profit (loss) Network 2,078 922 3,009
2,254 Power 2,195 1,910 3,512 3,079 Wireless
(1,562 ) (1,090
) (4,206 )
(2,584 ) Operating profit excluding
severance, impairment and other associated costs, and legal reserve
costs 2,711 1,742 2,315 2,749 Severance, impairment and other
associated costs 976 93 1,937 112 Legal reserve
11 37
22 75 Operating
profit $ 1,724 $ 1,612 $ 356 $ 2,562 FINANCIAL POSITION
(UNAUDITED) (in thousands)
6/27/2014
12/27/2013 Cash and cash
equivalents $ 24,774 $ 26,902 Accounts receivable, net 64,381
62,185 Inventory, net 30,920 36,726 Prepaid expenses and other
current assets 17,490 18,966 Net property, plant and equipment
25,655 27,955 Other assets
17,229
16,100 Total assets 180,449 188,834
Accounts payable 69,112 70,871 Current portion of long-term
debt - 22,315 Accrued expenses and other current liabilities 38,089
36,335 Long-term debt 116,231 90,030 Other long-term liabilities
23,815 22,841
Total liabilities 247,247 242,392 Total deficit
(66,798 ) (53,558
) Total liabilities and deficit $ 180,449 $
188,834 Shares outstanding 17,304 7,956
Schedule
A
NON-GAAP MEASURES (UNAUDITED)
(in thousands, except per-share
amounts)
1. Operating profit excluding severance, impairment
and other associated costs, legal reserve costs, and non-cash
stock-based compensation expenses
Quarter Ended
Six Months Ended 6/27/14
6/28/13 6/27/14
6/28/13 Operating profit $
1,724 $ 1,612 $ 356 $ 2,562 Pre-tax severance, impairment and other
associated costs 976 93 1,937 112 Pre-tax non-cash stock-based
compensation expenses 237 423 743 1,002 Pre-tax legal reserve
11 37 22 75
Operating profit excluding severance, impairment and other
associated costs, legal reserve costs, and non-cash stock-based
compensation expenses $ 2,948 $ 2,165 $ 3,058 $ 3,751
2. Net loss per diluted share excluding severance, impairment and
other associated costs, legal reserve costs, and non-cash
stock-based compensation expenses
Quarter Ended
Six Months Ended 6/27/14
6/28/13 6/27/14
6/28/13 Net loss per
diluted share $ (0.45 ) $ (0.65 ) $ (1.12 ) $ (1.55 ) After-tax
severance, impairment and other associated costs, per share 0.04
0.01 0.09 0.01 After-tax non-cash stock-based compensation
expenses, per share 0.01 0.03 0.03 0.08 After-tax legal reserve,
per share 0.00 0.01 0.00
0.01 Net loss per diluted share excluding
severance, impairment and other associated costs, legal reserve
costs, and non-cash stock-based compensation expenses $ (0.40 ) $
(0.60 ) $ (1.00 ) $ (1.45 ) 3. Adjusted EBITDA
Quarter
Ended 6/27/14
6/28/13 Net loss attributable to Pulse
Electronics Corporation $ (7,809 ) $ (5,230 ) Non-controlling
interest (30 ) 9 Income tax expense (benefit) 3,520 (349 ) Interest
expense, net 6,361 6,774 Non-cash stock-based compensation expenses
237 423 Depreciation and amortization 1,829 1,862 Other (income)
expense, net (318 ) 408 Severance, impairment and other associated
costs 976 93 Legal reserve 11 37
Adjusted EBITDA $ 4,777 $ 4,027
Pulse ElectronicsJim ButlerSr. Director of Finance and
Treasurer858-674-8183jbutler@pulseelectronics.com