ENWV Endwave Corp. (MM)

Endwave Reports Third Quarter 2004 Financial Results Endwave Meets Guidance and Generates Over $400,000 in Cash from Operations SUNNYVALE, Calif., Nov. 2 /PRNewswire-FirstCall/ -- Endwave Corporation (NASDAQ:ENWV), a leading provider of radio frequency (RF) subsystems for carrier-class cellular backhaul infrastructure, broadband wireless networks, homeland security and defense systems, today reported financial results for its third quarter ended September 30, 2004. Endwave reported revenues of $7.6 million for the third quarter of 2004, compared with revenues of $7.6 million for the second quarter of 2004 and $8.2 million for the third quarter of 2003. Cash, cash equivalents and short-term investments as of September 30, 2004 decreased by $5.0 million, primarily as a result of the acquisition of JCA Technology for $5.9 million in cash, to $26.6 million, from a balance of $31.6 million at June 30, 2004. Net loss for the third quarter of 2004 was $2.0 million, or $0.21 per share, compared with net loss for the second quarter of 2004 of $429,000, or $0.04 per share, and a net loss for the third quarter of 2003 of $735,000, or $0.08 per share. Pro forma net loss for the third quarter of 2004 was $1.2 million, or $0.12 per share, compared with pro forma net loss for the second quarter of 2004 of $344,000, or $0.04 per share, and a pro forma net loss for the third quarter of 2003 of $85,000, or $0.01 per share. For the third quarter of 2004, pro forma net loss was calculated by excluding the amortization of intangible assets of $148,000, a write-off of in-process research and development of $320,000, a write-off for the impairment of long lived assets of $389,000, and a restructuring benefit of $4,000. For the second quarter of 2004, pro forma net loss was calculated by excluding the amortization of deferred stock compensation charge of $85,000. For the third quarter of 2003, pro forma net loss was calculated by excluding a restructuring charge of $490,000, impairment of long lived assets of $139,000, and the amortization of deferred stock compensation charge of $21,000. 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. "We met our revenue guidance during this seasonally slow third quarter, and generated over $400,000 in cash flow from operating activities with higher than forecasted gross margin," said Ed Keible, Endwave's CEO and President. "For the fourth quarter, Endwave is pleased to project $10 to $12 million in revenues based on growth in all of our markets. Additionally, multiple new product introductions in the fourth quarter are expected to generate significant increases in 2005 sales," added Keible. Endwave Third Quarter 2004 Summary: -- Revenues were $7.6 million, level with second quarter 2004 revenues. -- Revenues attributable to sales to customers in defense, homeland security, and other non-telecom markets comprised 20% of total revenues, or $1.5 million, for the third quarter of 2004. -- Shipped products to approximately 100 customers during the quarter. Our largest customers for the quarter were Nokia, Powerwave (formerly Allgon), Nera, and Stratex Networks. -- Gross margin was 29% in the third quarter, exceeding our guidance of 24% to 26%. -- Acquired JCA Technology for $5.9 million in cash in July 2004, and transitioned JCA manufacturing operations to our facility in Diamond Springs, California. -- Received qualification approval on prototype deliveries of integrated transceivers to a major European wireless telecom OEM for use in their next-generation PDH radios. -- Secured an early production contract for the RF Switching Network in SafeView's Security Screening Checkpoint System, and began the production transition to our offshore manufacturing partner. -- Announced the execution of a purchase order for the production of millimeter-wave receiver modules in support of next-generation atmospheric monitoring system. -- Delivered initial hardware to an E-Band radio customer for use in Gigabit Ethernet bridges. -- Successfully completed prototype testing an integrated transceiver designed with Epsilon(TM) packaging technology. Endwave will hold its regularly scheduled third quarter earnings call today at 1:30 p.m. Pacific 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 online after the earnings call at approximately 2:30 p.m. Pacific Standard Time, and will continue to remain available for 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 five calendar days by dialing 888-203-1112 (domestically) or 719-457-0820 (internationally), and entering the confirmation code 981512. About Endwave Endwave Corporation develops and manufactures radio frequency (RF) subsystems for use in high-speed cellular backhaul networks, enterprise access, homeland security, defense electronics, commercial radar systems, and other broadband applications. These products include integrated transceivers, outdoor units, oscillators/synthesizers, high-power cellular switch-combiners, and RF modules (amplifiers, frequency multipliers, switches, and up/down- converters). Endwave has more than 35 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 Lamphun, 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 may contain forward-looking statements within the meaning of the Federal securities laws and is subject to the safe harbor created thereby. These statements include, but are not limited to, statements regarding forecasted future financial results. Actual results could differ materially from the forward-looking statements due to many factors, including the following: the risks that the integration of acquired business lines, products and subsidiaries will fail, products will fail to achieve market acceptance, the timing or existence of customer orders, market volatility and weakness, customer concentration, delays in the design process, production delays or cancellations due to product defects or defects in materials supplied by vendors, the length of our sales cycle, our ability to develop, introduce and market new products and product enhancements, changes in product mix or distribution channels; the demand for wireless networking products and end-user products that incorporate wireless technology; competitive technologies; and, technological difficulties and resource constraints encountered in developing, transitioning and/or introducing new products. Forward-looking statements contained in this press release 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 report on Form 10-K and subsequently filed reports on Form 10-Q. Condensed Consolidated Balance Sheets (in thousands) (unaudited) September 30, December 31, 2004 2003 Assets Current assets Cash and cash equivalents $15,629 $13,408 Restricted cash -- 778 Short-term investments 10,984 15,890 Accounts receivables, net 5,458 6,581 Inventories, net 7,625 8,119 Other current assets 292 898 Total current assets 39,988 45,674 Property and equipment, net 2,661 7,260 Other assets, net 125 140 Goodwill and other intangible assets, net 5,843 Total assets $48,617 $53,074 Liabilities and stockholders' equity Current liabilities: Accounts payable 2,132 3,088 Warranty accrual 5,031 5,835 Accrued compensation 1,733 1,139 Other accrued liabilities 1,275 1,090 Current portion of notes payable -- 516 Total current liabilities 10,171 11,668 Notes payable, less current portion -- 262 Other long-term liabilities 618 101 Total stockholders' equity 37,828 41,043 Total liabilities and stockholders' equity $48,617 $53,074 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, 2004 2003 2004 2003 Total revenues $7,594 $8,204 $21,787 $24,331 Costs and expenses: Cost of product revenues 5,407 5,898 14,635 19,090 Cost of product revenues, amortization of intangible assets 75 -- 75 -- Research and development 1,395 1,097 3,452 3,643 Selling, general and administrative 2,204 1,556 5,738 6,788 In-process research and development 320 -- 320 -- Amortization of intangible assets 73 -- 73 -- Restructuring charges, net (4) 490 2,895 490 Loss (recovery) on building sublease -- -- (359) 662 Impairment of long lived assets and other 389 139 389 2,548 Amortization of deferred stock compensation -- 21 204 617 Total costs and expenses 9,859 9,201 27,422 33,838 Loss from operations (2,265) (997) (5,635) (9,507) Interest and other, net 231 262 993 404 Net loss $(2,034) $(735) $(4,642) $(9,103) Basic and diluted net loss per share $(0.21) $(0.08) $(0.48) $(1.00) Weighted shares used in per- share calculation 9,897,077 9,179,749 9,674,842 9,084,222 PRO FORMA 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, 2004 2003 2004 2003 Total revenues $7,594 $8,204 $21,787 $24,331 Costs and expenses: Cost of product revenues 5,407 5,898 14,635 19,090 Research and development 1,395 1,097 3,452 3,643 Sales, general and administrative 2,204 1,556 5,738 6,788 Total costs and expenses 9,006 8,551 23,825 29,521 Loss from operations (1,412) (347) (2,038) (5,190) Interest and other, net 231 262 888 404 Net income (loss) $(1,181) $(85) $(1,150) $(4,786) Basic net income (loss) per share $(0.12) $(0.01) $(0.12) $(0.53) Weighted shares used in basic per-share calculation 9,897,077 9,179,749 9,674,842 9,084,222 Basis of presentation: 1. Pro forma operating results exclude restructuring charges, loss (recovery) on building sublease, impairment of long lived assets and other, 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 Nine months ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2004 2003 2004 2003 Net loss actual $(2,034) $(735) $(4,642) $(9,103) Cost of product revenues, amortization of intangible assets 75 -- 75 -- In-process research and development 320 -- 320 -- Amortization of intangible assets 73 -- 73 -- Restructuring charges, net (4) 490 2,895 490 Loss (recovery) on building sublease -- -- (359) 662 Impairment of long lived assets and other 389 139 389 2,548 Amortization of deferred stock compensation -- 21 204 617 Gain on sale of land -- -- (105) -- Net income (loss) pro forma $(1,181) $(85) $(1,150) $(4,786) 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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