N@N

Ikanos Communications Reports Results for Third Quarter 2009

^{Published on 2009-10-27 17:20:57 - Market Wire}
 

FREMONT, CA--(Marketwire - October 27, 2009) - Ikanos Communications, Inc. (NASDAQ: [ IKAN ]), a leading provider of advanced broadband semiconductor and software products for the digital home, today reported its financial results for the third quarter ended September 27, 2009.

"During the third quarter, we successfully completed a number of strategic initiatives including the Conexant Broadband Access acquisition, a strategic alliance with ASSIA Inc., and the introduction of Ikanos Velocity™, the industry's lowest power high-performance A/VDSL central office chipset," said Michael Gulett, president and CEO at Ikanos. "These accomplishments strengthen our ability to compete in our core broadband DSL market. In addition, we are pleased with the growth in our communications processor business which accounted for approximately 25 percent of revenue in the most recent quarter."

Financial Highlights:

Revenue for the third quarter of 2009 was $29.3 million compared with revenue of $22.4 million for the second quarter of 2009 and revenue of $24.2 million for the year ago period.

Ikanos reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP) and additionally on a non-GAAP basis. Non-GAAP net income (loss), where applicable, excludes the income statement effects of stock-based compensation, restructuring charges and certain expenses resulting from acquisitions such as transaction-related expenses, amortization of intangible assets, asset impairments, investment impairments, one time severance expenses, fair value adjustment of the acquired inventory and in-process research and development charges. Ikanos has provided these measures because management believes these additional non-GAAP measures are useful to investors for performing financial analysis as these additional measures highlight Ikanos' recurring operating results. Ikanos' management uses these non-GAAP measures internally to evaluate its operating performance and to plan for its future. However, non-GAAP measures are not a substitute for GAAP reporting. For a reconciliation of GAAP versus non-GAAP financial information, please see the attached schedule.

GAAP net loss for the third quarter of 2009 was $15.5 million, or $0.40 per share, on 38.8 million weighted average shares. This compares with a net loss of $6.4 million, or $0.22 per share, on 29.4 million weighted average shares in the second quarter of 2009 and with a net loss of $26.7 million, or $0.93 per share, on 28.6 million weighted average shares in the third quarter of 2008.

Non-GAAP net loss for the third quarter of 2009 was $4.5 million, or $0.12 per share, on 38.8 million weighted average shares. This compares with non-GAAP net loss of $2.8 million, or $0.09 per share, in the second quarter of fiscal 2009, and with a non-GAAP net loss of $2.2 million, or $0.08 per share, in the third quarter of 2008.

Revenue for the nine months ended September 27, 2009 was $72.5 million compared with the $83.7 million reported for the nine months ended September 28, 2008.

GAAP net loss for the nine months ended September 27, 2009 was $28.0 million, or $0.86 per share, on 32.5 million weighted average shares. This compares with a net loss of $35.4 million, or $1.22 per share, on 29.1 million weighted average shares for the year ago period.

Non-GAAP net loss for the nine months ended September 27, 2009 was $10.0 million, or $0.31 per share, compared with non-GAAP net loss of $0.6 million, or $0.02 per share, for the year ago period. Weighted average shares used in computing non-GAAP net loss per share were 32.5 million in 2009 and 29.1 million in 2008.

Recent Highlights:

 -- Ikanos completed the acquisition of the Broadband Access product line from Conexant Systems, Inc. Under the terms of the agreement, Ikanos purchased Conexant's Broadband Access product line for approximately $53 million in cash, excluding transaction costs, and the assumption of certain employee and facility related liabilities. Simultaneously, Ikanos received an investment of $42 million, excluding transaction-related expenses, from Tallwood Venture Capital. -- Ikanos introduced its Ikanos Velocity™ family of low-power, full- featured VDSL access chipsets. These robust, high-density central office (CO) devices provide up to 100 Mbps symmetric bandwidth and operate at sub 1 Watt per port -- the lowest power consumption of any A/VDSL device on the market. And the Ikanos Velocity chipsets are the first CO A/VDSL semiconductor devices compliant with European Code of Conduct (CoC) power consumption standards. The Velocity chipsets also include proprietary Ikanos Quality Video (iQV™) technology, which provides exceptional delivery of data-intensive triple play applications, including multi- channel high-definition IPTV, high-speed data transmission, video on demand (VoD) and voice over Internet Protocol (VoIP). -- Ikanos announced a strategic relationship with ASSIA Inc., a leading provider of Dynamic Spectrum Management (DSM) technology. Under terms of the agreement, Ikanos receives a license to ASSIA's essential DSM patents and certain know how for the development of vectored DSL products -- also known as DSM Level 3 or G. Vector -- capable of delivering speeds of 100 Mbps and greater over existing copper loops. In addition, the two companies will co-market each others' products to the network equipment and service provider industries. -- Ikanos announced that it has joined forces with DSP Group, Inc™ to demonstrate a reference design for a multi-service residential gateway with fully integrated Digital Enhanced Cordless Telecommunications (DECT) capabilities. The DECT/CAT-iq Module from DSP Group, combined with Ikanos' Fusiv® Vx180 integrated gateway processor, is designed to enable network equipment manufacturers to quickly bring to market a platform that supports cordless telephony as a part of a residential gateway offering. 

Outlook:

 -- Revenue is expected to be between $55.0 million and $58.0 million for the fourth quarter of 2009. -- Non-GAAP gross margins are expected to be between 44% and 46% in the fourth quarter of 2009. GAAP gross margins in the fourth quarter of 2009 will be lower than non-GAAP gross margins, as they will include amortization of acquisition-related intangibles of approximately $2.0 million, amortization of the fair-value of acquired inventory of approximately $6.0 to $7.5 million and charges related to stock-based compensation expense in accordance with FAS 123(R) of approximately $0.1 million. -- Non-GAAP operating expenses are expected to be in the range of $25.0 to $26.0 million in the fourth quarter of 2009. GAAP operating expenses in the fourth quarter of 2009 will be higher than non-GAAP operating expenses, as they will include amortization of acquisition-related intangibles of $1.9 million and charges related to stock-based compensation expense in accordance with FAS 123(R) of $1.5 to $2.0 million. 

Third Quarter Fiscal Year 2009 Conference Call:

Management will review the third quarter 2009 financial results and its expectations for subsequent periods at a conference call on October 27, 2009 at 1:30 p.m. Pacific Time. To listen to the call and view the accompanying presentation, please visit [ http://www.ikanos.com/investor/webcasts/ ] and click on the link provided for the webcast or dial 706-902-1343 and enter pass code 36682987. The webcast will be archived and available through November 2, 2009 at [ http://www.ikanos.com/investor/webcasts/ ] or by calling 706-645-9291 and enter pass code 36682987.

About Ikanos Communications, Inc.

Ikanos Communications, Inc. (NASDAQ: [ IKAN ]) is a leading provider of advanced broadband semiconductor and software products for the digital home. The company's broadband DSL, communications processors and other offerings power access infrastructure and customer premises equipment for many of the world's leading network equipment manufacturers and telecommunications service providers. For more information, visit [ www.ikanos.com ].

© 2009 Ikanos Communications, Inc. All Rights Reserved. Ikanos Communications, Ikanos, the Ikanos logo, the Bandwidth without boundaries tagline, Fusiv, Fx, and FxS, iQV and Ikanos Velocity are among the trademarks or registered trademarks of Ikanos Communications. All other trademarks mentioned herein are properties of their respective holders.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This document contains forward-looking statements that are subject to risks and uncertainties concerning Ikanos Communications, including statements regarding the expected revenue for the fourth quarter of 2009, expected gross margins for the fourth quarter of 2009, expected operating expenses for the fourth quarter of 2009, and our ability to compete in the broadband DSL market. Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties. These potential risks and uncertainties include, but are not limited to, the complexity of combining the legacy Ikanos and BBA businesses, effects of the on-going worldwide economic recession on our customers' purchasing plans, our ability to deliver full production releases of our newer products and the acceptance of those products our customers, the continued demand by telecommunications service providers for ADSL and VDSL semiconductor products, the failure of service providers to implement deployment plans on schedule or at all, our continued ability to obtain and deliver production volumes of new and current products and technologies, our ability to generate demand and close transactions for the sale of our products, and unexpected future costs, expenses and financing requirements. In addition, for a more extensive discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see the section entitled "Risk Factors" in Ikanos' most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, as well as other reports that Ikanos files from time to time with the Securities and Exchange Commission. Ikanos is under no obligation to update these forward-looking statements to reflect events or circumstances subsequent to date of this press release.

 IKANOS COMMUNICATIONS, INC. Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share data) Three Months Ended Nine Months Ended -------------------- -------------------- September September September September 27, 2009 28, 2008 27, 2009 28, 2008 --------- --------- --------- --------- Revenue $ 29,334 $ 24,178 $ 72,497 $ 83,730 Cost of revenue 19,036 14,212 44,429 48,265 --------- --------- --------- --------- Gross profit 10,298 9,966 28,068 35,465 --------- --------- --------- --------- Operating expenses: Research and development 13,290 10,282 31,744 33,516 Selling, general and administrative 9,615 8,142 21,295 20,282 Asset impairments 2,460 12,496 2,460 12,496 Restructuring charges 502 - 1,048 - --------- --------- --------- --------- Total operating expenses 25,867 30,920 56,547 66,294 --------- --------- --------- --------- Loss from operations (15,569) (20,954) (28,479) (30,829) Investment impairment - (6,166) - (6,166) Interest income, net 146 427 603 1,669 --------- --------- --------- --------- Loss before income taxes (15,423) (26,693) (27,876) (35,326) Provision for (benefit from) income taxes 31 (27) 111 97 --------- --------- --------- --------- Net loss $ (15,454) $ (26,666) $ (27,987) $ (35,423) ========= ========= ========= ========= Basic and diluted net loss per share $ (0.40) $ (0.93) $ (0.86) $ (1.22) ========= ========= ========= ========= Weighted average number of shares 38,802 28,565 32,466 29,139 ========= ========= ========= ========= IKANOS COMMUNICATIONS, INC. Unaudited reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations (In thousands, except per share data) Three Months Ended September 27, 2009 ------------------------------------------------------------- As Non-GAAP Non-GAAP Non-GAAP Reported Adjustments Non-GAAP BBA Ikanos ---------- ----------- ---------- ---------- ---------- Revenue $ 29,334 $ - $ 29,334 $ 5,204 $ 24,130 Cost of revenue 19,036 (60)(a) 16,426 3,184 13,242 - (1,059)(b) - - - - (1,491)(d) - - - ---------- ---------- ---------- ---------- ---------- Gross profit 10,298 (2,610) 12,908 2,020 10,888 ---------- ---------- ---------- ---------- ---------- Operating expenses: Research and development 13,290 (895)(a) 11,945 4,020 7,925 - - - - - - (450)(h) - - - Selling, general and admin- istrative 9,615 (612)(a) 5,543 946 4,597 - (883)(b) - - - - (2,577)(h) - - - Asset impairments 2,460 (2,460)(e) - - - Restructuring charges 502 (502)(f) - - - ---------- ---------- ---------- ---------- ---------- Total operating expenses 25,867 (8,379) 17,488 4,966 12,522 ---------- ---------- ---------- ---------- ---------- Loss from operations (15,569) 10,989 (4,580) (2,946) (1,634) Investment impairment - - - - - Interest income and other, net 146 - 146 - 146 ---------- ---------- ---------- ---------- ---------- Loss before income taxes (15,423) 10,989 (4,434) (2,946) (1,488) ---------- ---------- ---------- ---------- ---------- Provision for (benefit from) income taxes 31 - 31 - 31 ---------- ---------- ---------- ---------- ---------- Net loss $ (15,454) $ 10,989 $ (4,465) $ (2,946) $ (1,519) ========== ========== ========== ========== ========== Net loss per share: Basic and diluted $ (0.40) $ (0.12) Weighted average outstanding shares: Basic and diluted 38,802 38,802 Three Months Ended September 28, 2008 ------------------------------------- As Non-GAAP Reported Adjustments Non-GAAP ---------- ----------- ---------- Revenue $ 24,178 $ - $ 24,178 Cost of revenue 14,212 7 (a) 13,090 - (762)(b) - - (367)(d) - ---------- ---------- ---------- Gross profit 9,966 (1,122) 11,088 ---------- ---------- ---------- Operating expenses: Research and development 10,282 (1,185)(a) 8,870 - (125)(b) - - (102)(c) - Selling, general and admin- istrative 8,142 (2,035)(a) 4,864 - (611)(b) - - (632)(c) - Asset impairments 12,496 (12,496)(e) - Restructuring charges - - - ---------- ---------- ---------- Total operating expenses 30,920 (17,186) 13,734 ---------- ---------- ---------- Loss from operations (20,954) 18,308 (2,646) Investment impairment (6,166) 6,166 (g) - Interest income and other, net 427 - 427 ---------- ---------- ---------- Loss before income taxes (26,693) 24,474 (2,219) ---------- ---------- ---------- Provision for (benefit from) income taxes (27) - (27) ---------- ---------- ---------- Net loss $ (26,666) $ 24,474 $ (2,192) ========== ========== ========== Net loss per share: Basic and diluted $ (0.93) $ (0.08) Weighted average outstanding shares: Basic and diluted 28,565 28,565 Notes: Three Months Ended September September 27, 2009 28, 2008 ---------- ---------- (a) Stock-based compensation $ 1,567 $ 3,213 (b) Amortization of acquired intangible assets 1,942 1,498 (c) Severance - 734 (d) Fair-value adjustment of acquired inventory 1,491 367 (e) Impairments of assets and in-process R&D 2,460 12,496 (f) Restructuring charges 502 - (g) Investment impairment - 6,166 (h) Transaction-related expenses 3,027 - ---------- ---------- Total non-GAAP adjustments $ 10,989 $ 24,474 ========== ========== IKANOS COMMUNICATIONS, INC. Unaudited reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations (In thousands, except per share data) Nine Months Ended September 27, 2009 ------------------------------------- As Non-GAAP Reported Adjustments Non-GAAP ---------- ----------- ---------- Revenue $ 72,497 $ - $ 72,497 Cost of revenue 44,429 (209)(a) 40,257 - (2,472)(b) - - (1,491)(d) - ---------- ---------- ---------- Gross profit 28,068 (4,172) 32,240 ---------- ---------- ---------- Operating expenses: Research and development 31,744 (2,314)(a) 28,980 - (450)(h) - - - - - - - Selling, general and administrative 21,295 (1,897)(a) 13,783 - (1,626)(b) - - (3,989)(h) - Asset impairments 2,460 (2,460)(f) - Restructuring charges 1,048 (1,048)(e) - ---------- ---------- ---------- Total operating expenses 56,547 (13,784) 42,763 ---------- ---------- ---------- Loss from operations (28,479) 17,956 (10,523) Investment impairment - - - Interest income and other, net 603 - 603 ---------- ---------- ---------- Loss before income taxes (27,876) 17,956 (9,920) ---------- ---------- ---------- Provision for income taxes 111 - 111 ---------- ---------- ---------- Net loss $ (27,987) $ 17,956 $ (10,031) ========== ========== ========== Net loss per share: Basic and diluted $ (0.86) $ (0.31) Weighted average outstanding shares: Basic and diluted 32,466 32,466 Nine Months Ended September 28, 2008 ------------------------------------- As Non-GAAP Reported Adjustments Non-GAAP ---------- ----------- ---------- Revenue $ 83,730 $ - $ 83,730 Cost of revenue 48,265 (230)(a) 43,828 - (2,744)(b) - - (1,463)(d) - ---------- ---------- ---------- Gross profit 35,465 (4,437) 39,902 ---------- ---------- ---------- Operating expenses: Research and development 33,516 (4,227)(a) 28,502 - (375)(b) - - (102)(c) - - (310)(f) - Selling, general and administrative 20,282 (4,189)(a) 13,562 - (1,899)(b) - - (632)(c) - Asset impairments 12,496 (12,496)(f) - Restructuring charges - - - ---------- ---------- ---------- Total operating expenses 66,294 (24,230) 42,064 ---------- ---------- ---------- Loss from operations (30,829) 28,667 (2,162) Investment impairment (6,166) 6,166 (g) - Interest income and other, net 1,669 - 1,669 ---------- ---------- ---------- Loss before income taxes (35,326) 34,833 (493) ---------- ---------- ---------- Provision for income taxes 97 - 97 ---------- ---------- ---------- Net loss $ (35,423) $ 34,833 $ (590) ========== ========== ========== Net loss per share: Basic and diluted $ (1.22) $ (0.02) Weighted average outstanding shares: Basic and diluted 29,139 29,139 Notes: Nine Months Ended September September 27, 2009 28, 2008 ---------- ---------- (a) Stock-based compensation $ 4,420 $ 8,646 (b) Amortization of acquired intangible assets 4,098 5,018 (c) Severance - 734 (d) Fair-value adjustment of acquired inventory 1,491 1,463 (e) Restructuring charges 1,048 - (f) Impairments of assets and in-process R&D 2,460 12,806 (g) Investment impairment - 6,166 (h) Transaction-related expenses 3,989 - ---------- ---------- Total non-GAAP adjustments $ 17,506 $ 34,833 ========== ========== IKANOS COMMUNICATIONS, INC. Unaudited Condensed Consolidated Balance Sheets (In thousands) September 27, December 28, 2009 2008 ------------ ------------ Assets Current assets: Cash, cash equivalents and short-term investments $ 37,833 $ 63,339 Accounts receivable, net 17,888 12,360 Inventory 34,532 12,489 Prepaid expenses and other current assets 2,555 1,744 ------------ ------------ Total current assets 92,808 89,932 Long-term investments 1,034 1,034 Property and equipment, net 8,033 9,597 Intangible assets, net 29,468 6,290 Goodwill 8,633 - Other assets 1,145 580 ------------ ------------ $ 141,121 $ 107,433 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 17,521 $ 9,237 Accrued liabilities 15,594 8,680 ------------ ------------ Total current liabilities 33,115 17,917 Other liabilities 3,448 - ------------ ------------ Total liabilities 36,563 17,917 Stockholders' equity 104,558 89,516 ------------ ------------ $ 141,121 $ 107,433 ============ ============