Second Fiscal Quarter Financial Results
Conexant presents financial results based on Generally Accepted Accounting Principles (GAAP) as well as select non-GAAP financial measures intended to reflect its core results of operations. The company believes these core financial measures provide investors with additional insight into its underlying operating results. Core financial measures exclude certain non-cash and other non-core items as fully described in the GAAP to non-GAAP reconciliation in the accompanying financial data.
Revenues for the second quarter of fiscal 2009 were $74.5 million. Core gross margins were 52.7 percent of revenues. Core operating expenses were $41 million, and core operating loss was $1.8 million. Core net loss from continuing operations was $7.4 million, or $0.15 per share.
On a GAAP basis, gross margins were 52.5 percent of revenues. GAAP operating expenses were $48.4 million. GAAP operating loss was $9.3 million, and GAAP net loss from continuing operations was $14.8 million, or $0.30 per share.
The company ended the quarter with $110.3 million in cash and cash equivalents, which was flat sequentially as improvements in working-capital management drove a positive net cash flow from operations.
“The Conexant team delivered performance that met or exceeded our expectations on all major financial metrics for the second fiscal quarter,” said Scott Mercer, Conexant’s chairman and chief executive officer. “Revenues of $74.5 million exceeded the high end of the range we provided in January. Gross margin of 52.7 percent was within the range we expected, and core operating expenses of $41 million were a million dollars lower than we anticipated entering the quarter due to our continued focus on cost-reduction activities. On a core operating basis, our loss of $1.8 million was lower than our expectation of a core operating loss in a range between $3 million and $7 million, resulting in a core net loss of $0.15 per share rather than the $0.18 to $0.26 per share we anticipated.”
Broadband Access Divestiture and the Continuing Conexant
Last week, Conexant announced plans to sell its Broadband Access product lines to Ikanos Communications for $54 million. The company expects to close the transaction in the fourth fiscal quarter.
“Proceeds from the divestiture will provide us with additional flexibility to make targeted investments to further expand our product portfolio,” Mercer said. “We also have the option of using some or all of the proceeds to strengthen our balance sheet by retiring debt.
“When we complete the transaction, the continuing Conexant will be exclusively focused on providing solutions for imaging, audio, video, and embedded-modem applications,” Mercer said. “We have established leadership positions in each of these segments, which are expected to grow over the next several years. Our strategy moving forward is to capitalize on these growth trends by applying our core expertise in analog and mixed-signal design, firmware and software development, and our extensive applications knowledge to deliver innovative solutions that contribute to the success of our customers worldwide.
“We expect our continuing Conexant to deliver improved financial performance and positive cash flow,” Mercer said. “We anticipate that core gross margins for our continuing company will be in the mid-fifties or higher as a percentage of revenues. In terms of core operating expenses, direct costs associated with our Broadband Access business are approximately $15 million per quarter. When the transaction is completed, we plan to reduce core operating expenses for our continuing company by several million dollars per quarter. As we get closer to completing the transaction, we will provide more information on the financial performance we anticipate from our continuing company.”
Third Fiscal Quarter Business Outlook
Conexant expects revenues for the third quarter of fiscal 2009 to be in a range between $81 million and $84 million, or approximately 9 to 13 percent higher sequentially. Core gross margins for the third fiscal quarter are expected to be between 52 and 53 percent of revenues. The company expects core operating expenses to be between $39 million and $40 million. As a result, the company anticipates that third fiscal quarter core operating income will be in a range between $3 million and $5 million. Core net loss is expected to be between $0.03 and $0.06 per share.
Conference Call Today
Financial analysts, members of the media, and the public are invited to
participate in a conference call that will take place today at 5:00 p.m.
Eastern Time (ET)/ 2:00 p.m. Pacific Time (PT). Scott Mercer, chairman
and chief executive officer, Christian Scherp, president, and Jean Hu,
senior vice president and chief financial officer, will discuss second
quarter fiscal 2009 financial results and the company’s outlook. To
listen to the conference call via telephone, dial 866-650-4882 (in the
U.S. and Canada) or 706-679-7338 (from other international locations);
participant pass code: Conexant; Conference ID number: 95325725.