CTLM Centillium Communications (MM)

FREMONT, Calif., Aug. 2 /PRNewswire-FirstCall/ -- Centillium Communications, Inc. (NASDAQ:CTLM), a leading provider of broadband access solutions, today announced financial results for the second quarter ended June 30, 2007. Net revenues for the second quarter of 2007 were $10.0 million, compared with $10.6 million during the first quarter of 2007 and $18.3 million during the second quarter of 2006. During the second quarter of 2007, revenues by region, as a percentage of the company's net revenues, were 47 percent from Japan, 32 percent from Europe, 13 percent from the U.S. and 8 percent from Asia, outside of Japan. Also, during the second quarter of 2007, revenues by market, as a percentage of the company's net revenues, were 67 percent from ADSL, 29 percent from VoIP and 4 percent from Optical. The company reports its net loss and basic and diluted net loss per share in accordance with U.S. generally accepted accounting principles (GAAP). Additionally, the company has supplemented its reported GAAP financials with non-GAAP measures in this press release. Non-GAAP gross margin, operating expenses, net loss and net loss per share, where applicable, exclude the effect of stock-based compensation and, with respect to the second quarter and first half of 2007, the effect of the loss on settlement of previously disclosed litigation and a surplus space charge. The company uses the non-GAAP information internally to evaluate its continuing operational performance and to determine incentive compensation, and believes these non-GAAP measures are useful to investors as they provide additional insight into the underlying operating results and the company's ongoing performance in the ordinary course of its operations. However, non-GAAP measures are not stated in accordance with, should not be considered in isolation from and are not a substitute for GAAP measures, and our non-GAAP measures may be different from similarly titled non-GAAP measures reported by other companies. A reconciliation of GAAP to non-GAAP results is provided in the table immediately below the GAAP Consolidated Statements of Operations included in this release. The GAAP gross margin was 55.1 percent (55.2 percent, non-GAAP) for the second quarter of 2007, compared with 52.1 percent (52.2 percent, non-GAAP) for the first quarter of 2007 and 52.5 percent (52.6 percent, non-GAAP) for the second quarter of 2006. GAAP results were a net loss of $8.9 million, or a net loss of $0.22 per share, for the second quarter of 2007, compared with a net loss of $5.9 million, or a net loss of $0.14 per share, for the first quarter of 2007 and a net loss of $1.6 million, or a net loss of $0.04 per share, for the second quarter of 2006. The GAAP results for all periods include charges for stock-based compensation due to the adoption of SFAS 123R, effective Jan. 1, 2006. The GAAP results for the second quarter and first half of 2007 include the $2.5 million loss on settlement and the $308,000 surplus space charge. Non-GAAP results, which exclude the effect of the loss on settlement, surplus space charge and stock-based compensation, were a net loss of $5.6 million, or a net loss of $0.14 per share, for the second quarter of 2007, compared with a net loss of $5.3 million, or a net loss of $0.13 per share, for the first quarter of 2007 and a net loss of $771,000 or $0.02 per share, for the second quarter of 2006. Total cash and short-term investments were $48.0 million at June 30, 2007, compared with $52.6 million at March 31, 2007. In addition, the company remains debt free. "During the quarter, we announced our Arion(TM) II Gateway CPE, Centillium's first gateway system-on-chip (SoC) for VDSL2 networks," said Faraj Aalaei, co-founder and CEO of Centillium. "The Arion II offers equipment manufacturers fast time-to-market and proven processing power for voice, data and video in residential and small-office markets, and it integrates within a single device the features of our Atlanta(TM) Voice over Internet Protocol (VoIP) system and Arion eXtremeVDSL2(TM) digital device. The Arion II Gateway CPE integrates our many years of experience in deploying VoIP network processors and DSL solutions worldwide," said Aalaei. A conference call to review the second quarter 2007 financial results will follow this release at 2:00 p.m. Pacific time/5:00 p.m. Eastern time. To listen to the call, please dial (517) 623-4705, passcode: Centillium. A replay will be made available approximately one hour after the conclusion of the call and will remain available for approximately one week. To access the replay, dial (203) 369-3543. The conference call will also be web cast over the Internet; visit the Investor Relations section of the Centillium Communications website at http://www.centillium.com/ to access the call from the website. This web cast will be recorded and available for replay on the Centillium website from approximately two hours after the conclusion of the conference call until Sept. 30, 2007. About Centillium Communications, Inc. Centillium Communications, Inc. is a leading innovator of high performance, cost-effective semiconductor solutions that give consumers, enterprises and service providers the winning edge in broadband access. The company's complete, end-to-end system-on-chip solutions accelerate development time-to-market for "last mile" products with Digital Subscriber Line (DSL), Fiber-To-The-Premises (FTTP) and Voice-over-Internet Protocol (VoIP) technologies. Centillium products include digital and mixed-signal integrated circuits and related software for DSL and FTTP central office and customer premises equipment and VoIP solutions for carrier- and enterprise-class gateways and consumer telephony. Centillium is a global company with headquarters in Fremont, CA. Additional information is available at http://www.centillium.com/. Safe Harbor Statement under Private Securities Litigation Reform Act of 1995 This press release includes statements that are forward-looking statements within the meaning of U.S. federal securities laws. For example, this press release speaks to the introduction of Centillium's new Arion II product and potential market acceptance of the Arion II product. Actual results may differ materially from those indicated by such forward-looking statements based on a variety of risks and uncertainties, including without limitation the risks and uncertainties relating to the rate and breadth of deployment of broadband access in general, especially DSL, FTTP and VoIP technologies, and Centillium's technology solutions in particular; the successful development and market acceptance of Centillium's new products and technology; Centillium's dependence on a few significant customers for a substantial portion of its revenue; Centillium's ability to continue and expand on its relationships with new customers; the timing, rescheduling or cancellation of significant customer orders and Centillium's ability, as well as the ability of its customers, to manage inventory; Centillium's ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a cost-effective and timely manner; competitive pressures and other factors such as the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of Centillium's products; the timing of customer-industry qualification and certification of Centillium's products and the risks of non-qualification or non-certification; Centillium's ability to timely and accurately predict market requirements and evolving industry standards and to identify opportunities in new markets; changes in Centillium's product or customer mix; the satisfactory completion of the audits of Centillium's financial statements and systems of internal control; intellectual property disputes and customer indemnification claims and other types of litigation risk; the effectiveness of Centillium's expense and product cost control and reduction efforts; and Centillium's ability to attract, retain and motivate qualified personnel, including executive officers and other key management and technical personnel. Centillium undertakes no obligation to update forward-looking statements for any reason. Information about potential factors that could affect Centillium's financial results is included in Centillium's Annual Report on Form 10-K and in other documents on file with the Securities and Exchange Commission. Centillium Communications, the Centillium Logo, Arion, Atlanta and eXtremeVDSL2 are trademarks of Centillium Communications, Inc. in the United States and certain other countries. All rights reserved. - Summary Financial Data Attached - CENTILLIUM COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2007 2007 2006 2007 2006 (In thousands, except per share data) Net revenues $10,004 $10,552 $18,260 $20,556 $38,514 Cost of revenues (a) 4,491 5,058 8,667 9,549 17,408 Gross profit 5,513 5,494 9,593 11,007 21,106 Operating expenses: Research and development (a) 7,326 6,745 6,484 14,071 13,120 Selling, general and administrative (a) (b) 5,144 4,991 5,325 10,135 11,097 Loss on settlement 2,500 - - 2,500 - Total operating expenses 14,970 11,736 11,809 26,706 24,217 Operating loss (9,457) (6,242) (2,216) (15,699) (3,111) Interest income and other, net 653 688 710 1,341 1,326 Loss before provision for income taxes (8,804) (5,554) (1,506) (14,358) (1,785) Provision for income taxes 68 334 62 402 96 Net loss $(8,872) $(5,888) $(1,568) $(14,760) $(1,881) Basic and diluted net loss per share $(0.22) $(0.14) $(0.04) $(0.36) $(0.05) Shares used to compute basic and diluted net loss per share 41,229 41,149 40,514 41,189 40,398 (a) Includes stock-based compensation as follows: Cost of revenues $9 $10 $9 $19 $31 Research and development 225 241 317 466 666 Selling, general and administrative 261 336 471 597 994 $495 $587 $797 $1,082 $1,691 (b) Includes $308,000 surplus space charge for the three and six months ended June 30th, 2007. CENTILLIUM COMMUNICATIONS, INC. Supplemental Reconciliation of GAAP Results to Non-GAAP (Unaudited) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2007 2007 2006 2007 2006 (In thousands, except per share data) GAAP gross margin 55.1% 52.1% 52.5% 53.5% 54.8% Stock-based compensation 0.1% 0.1% 0.1% 0.1% 0.1% Non-GAAP gross margin 55.2% 52.2% 52.6% 53.6% 54.9% GAAP research and development expenses $7,326 $6,745 $6,484 $14,071 $13,120 Stock-based compensation 225 241 317 466 666 Non-GAAP research and development expenses $7,101 $6,504 $6,167 $13,605 $12,454 GAAP selling, general, and administrative expenses $5,144 $4,991 $5,325 $10,135 $11,097 Stock-based compensation 261 336 471 597 994 Surplus space charges 308 - - 308 - Non-GAAP selling, general, and administrative expenses $4,575 $4,655 $4,854 $9,230 $10,103 GAAP operating expenses $14,970 $11,736 $11,809 $26,706 $24,217 Loss on settlement 2,500 - - 2,500 - Stock-based compensation 486 577 788 1,063 1,660 Surplus space charges 308 - - 308 - Non-GAAP operating expenses $11,676 $11,159 $11,021 $22,835 $22,557 GAAP net loss $(8,872) $(5,888) $(1,568) $(14,760) $(1,881) Loss on settlement 2,500 - - 2,500 - Stock-based compensation 495 587 797 1,082 1,691 Surplus space charges 308 - - 308 - Non-GAAP net income (loss) $(5,569) $(5,301) $(771) $(10,870) $(190) GAAP net loss per share $(0.22) $(0.14) $(0.04) $(0.36) $(0.05) Loss on settlement 0.06 - - 0.06 - Stock-based compensation 0.01 0.01 0.02 0.03 0.04 Surplus space charges 0.01 - - 0.01 - Non-GAAP net income (loss) per share $(0.14) $(0.13) $(0.02) $(0.26) $(0.01) CENTILLIUM COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 2007 2006 (In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $21,691 $26,121 Short-term investments 26,356 29,278 Accounts receivable - net of allowance for doubtful accounts of $66 at June 30, 2007 and $80 at December 31, 2006 4,143 6,266 Inventories 3,843 4,968 Other current assets 2,684 2,985 Total current assets 58,717 69,618 Property and equipment, net 2,164 2,702 Other assets 1,449 578 Total assets $62,330 $72,898 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $6,203 $6,505 Accrued compensation and related expenses 3,972 3,249 Accrued liabilities and other 24,028 21,118 Total current liabilities 34,203 30,872 Other long-term liabilities 1,581 1,228 Stockholders' equity: Common stock; $0.001 par value: Authorized shares: 100,000,000; Issued and outstanding shares: 41,390,925 at June 30, 2007, 41,147,312 at December 31, 2006 41 41 Additional paid-in capital 253,416 251,964 Accumulated deficit (226,886) (211,189) Accumulated other comprehensive loss (25) (18) Total stockholders' equity 26,546 40,798 Total liabilities and stockholders' equity $62,330 $72,898 DATASOURCE: Centillium Communications, Inc. CONTACT: Hassan Parsa, Vice President, Business Development of Centillium Communications, Inc., +1-510-771-3624, ; or Christina L. Carrabino of CLC Communications, Inc., +1-415-929-9307, , for Centillium Communications, Inc. Web site: http://www.centillium.com/

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