ENWV Endwave Corp. (MM)

Endwave Reports Strong Second Quarter 2005 Financial Results Endwave Returns to Profitability in Q2 on 62% Year-Over-Year Revenue Growth SUNNYVALE, Calif., July 26 /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 second quarter ended June 30, 2005. Endwave reported revenues of $12.2 million for the second quarter of 2005, compared with revenues of $7.6 million for the second quarter of 2004 and $9.1 million for the first quarter of 2005. Cash, cash equivalents and short-term investments as of June 30, 2005 were $22.0 million compared with a balance of $24.8 million at March 31, 2005. Net income for the second quarter of 2005 was $318,000, or earnings of $0.03 per diluted share, compared with a net loss for the second quarter of 2004 of $429,000, or a loss of $0.04 per share, and a net loss for the first quarter of 2005 of $847,000, or a loss of $0.08 per share. Pro forma net income for the second quarter of 2005 was $424,000, or earnings of $0.04 per diluted share, compared with a pro forma net loss for the second quarter of 2004 of $344,000, or a loss of $0.04 per share, and a pro forma net loss for the first quarter of 2005 of $672,000, or a loss of $0.06 per share. For the second quarter of 2005, pro forma net income was calculated by excluding the amortization of intangible assets of $152,000 and a restructuring benefit of $46,000. For the second quarter of 2004, pro forma net loss was calculated by excluding the amortization of deferred stock compensation of $85,000. For the first quarter of 2005, pro forma net loss was calculated by excluding the amortization of intangible assets of $175,000. Management believes that excluding the items described above may permit investors to better compare results from period to period and more accurately assess the company's prospects. "Endwave's continued momentum in telecom, defense electronics and homeland security markets produced strong revenue and margin growth that fueled our profitability in the second quarter," said Ed Keible, Endwave's CEO and President. "First half revenues are up 50% from last year, with substantial increases in both legacy and new product sales that will position us well for sustained growth in the second half of 2005," added Keible. Endwave Second Quarter 2005 Summary: -- Recorded quarterly revenues of $12.2 million, 62% higher than the second quarter of 2004, and 35% higher than the first quarter of 2005. -- Increased revenues from sales to customers in defense, homeland security and other non-telecom markets by 237% from the second quarter of 2004, to $2.6 million, or 21% of total revenues in the second quarter of 2005. -- Delivered products to over 100 customers during the quarter. The largest customers for the quarter were Nokia and Siemens. -- Achieved an overall gross margin of 34% in the second quarter, up from 31% in the first quarter of 2005. -- Strengthened inventory levels in preparation for continued revenue growth in the second half of 2005. -- Secured a follow-on order from SafeView for additional Phase I switch arrays for use in SafeScout(TM), its advanced personnel screening portal. -- Initiated the Phase II development contract to engineer next-generation hardware in preparation for volume production of SafeView's portal scanner. -- Received a new sole-source development contract from a major US defense prime contractor to design and deliver complex RF subsystems for use in an airborne intelligence system. Endwave will hold its regularly scheduled second quarter earnings call today at 1:30 p.m. Pacific Daylight Time, which will be available via web cast by logging on to the investor relations section of our website at http://www.endwave.com/investors . The web cast replay will be available on-line after the earnings call at approximately 2:30 p.m. Pacific Daylight Time, and will continue to remain available for approximately 90 calendar days after the call. An audio telephone replay of the conference call will also be available approximately one hour following the conclusion of the call, and will continue to be available for 5 calendar days by dialing 888-203-1112 (domestically) or 719-457-0820 (internationally), and entering the confirmation code 8420874. 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. Our RF modules are typically used in high-frequency applications and include integrated transceivers, amplifiers, synthesizers, oscillators, up and down converters, frequency multipliers and microwave switch arrays. Endwave has 38 issued patents covering its core technologies including semiconductor and proprietary circuit designs. Endwave Corporation is headquartered in Sunnyvale, 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/ . "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 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; and our dependence on key personnel. 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 quarterly report on Form 10-Q. Endwave does not undertake any obligation to update such forward-looking statements. Condensed Consolidated Balance Sheets (in thousands) (unaudited) June 30, 2005 December 31, 2004 Assets Current assets Cash and cash equivalents $8,474 $14,158 Short-term investments 13,550 10,979 Accounts receivable, net 8,385 8,688 Inventories, net 15,880 7,866 Other current assets 785 477 Total current assets 47,074 42,168 Property and equipment, net 1,726 2,394 Other assets 104 125 Goodwill and other intangible assets, net 5,100 5,407 Total assets $54,004 $50,094 Liabilities and stockholders' equity Current liabilities Accounts payable 6,789 3,587 Warranty accrual 4,141 4,488 Accrued compensation 1,890 1,370 Other accrued liabilities 756 1,026 Total current liabilities 13,576 10,471 Other long-term liabilities 462 559 Total stockholders' equity 39,966 39,064 Total liabilities and stockholders' equity $54,004 $50,094 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (Unaudited) Three months ended Six months ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 Total revenues $12,242 $7,576 $21,342 $14,193 Costs and expenses: Cost of product revenues 7,959 5,257 14,134 9,228 Cost of product revenues, amortization of intangible assets 113 -- 226 -- Research and development 1,619 1,083 3,111 2,057 Selling, general and administrative 2,459 1,705 4,733 3,534 Amortization of intangible assets 39 85 101 -- Restructuring charges, net (46) -- (46) 2,899 Recovery on building sublease -- -- -- (359) Amortization of deferred stock compensation -- -- -- 204 Total costs and expenses 12,143 8,130 22,259 17,563 Income (loss) from operations 99 (554) (917) (3,370) Interest and other income, net 219 125 388 762 Net income (loss) $318 $(429) $(529) $(2,608) Basic net income (loss) per share $0.03 $(0.04) $(0.05) $(0.27) Diluted net income (loss) per share $0.03 $(0.04) $(0.05) $(0.27) Weighted shares used in basic per share calculation 10,659,553 9,655,341 10,589,105 9,563,724 Weighted shares used in diluted per share calculation 11,699,649 9,655,341 10,589,105 9,563,724 PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (in thousands, except share and per share amounts) (Unaudited) Three months ended Six months ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 Total revenues $12,242 $7,576 $21,342 $14,193 Costs and expenses: Cost of product revenues 7,959 5,257 14,134 9,228 Research and development 1,619 1,083 3,111 2,057 Sales, general and administrative 2,459 1,705 4,733 3,534 Total costs and expenses 12,037 8,045 21,978 14,819 Income (loss) from operations 205 (469) (636) (626) Interest and other income, net 219 125 388 657 Net income (loss) $424 $(344) $(248) $31 Basic net income (loss) per share $0.04 $(0.04) $(0.02) $0.00 Diluted net income (loss) per share $0.04 $(0.04) $(0.02) $0.00 Weighted shares used in basic per share calculation 10,659,553 9,655,341 10,589,105 9,563,724 Weighted shares used in diluted per share calculation 11,699,649 9,655,341 10,589,105 10,443,160 1. Pro forma operating results exclude restructuring charges, recovery on building sublease, amortization of deferred stock compensation, gain on sale of land and amortization of intangible assets. ACTUAL TO PRO FORMA NET LOSS RECONCILIATION (in thousands) (unaudited) Three months ended Six months ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 Net income (loss) - actual $318 $(429) $(529) $(2,608) Cost of product revenues, amortization of intangible assets 113 -- 226 -- Amortization of intangible assets 39 85 101 -- Restructuring charges, net (46) -- (46) 2,899 Recovery on building sublease -- -- -- (359) Amortization of deferred stock compensation -- -- -- 204 Gain on sale of land -- -- -- (105) Net income (loss) - pro forma $424 $(344) $(248) $31 DATASOURCE: Endwave Corporation CONTACT: Julianne Biagini, Chief Financial Officer, +1-408-522-3105, or Mark Hebeisen, VP Marketing, +1-978-686-4400, ext. 105, both of Endwave Corporation Web site: http://www.endwave.com/

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