-- 36% Product Revenue Growth Q2 vs. Q1 2006, 115% Year to Date Product Revenue Growth vs. 2005
-- Revenue Guidance Increased to $25 to $30 million, from $23 to $27 million for Full Year 2006
-- Production Qualification Approved for 1 Megabit Device with Real Time Clock
-- Loss Per Share Reduced For Six Months 2006 to ($0.02) vs. ($0.06) 2005
Simtek Corporation (OTC Bulletin Board: SRAM), the inventor, pioneer, and world's leading supplier of nonvolatile static random access memory (nvSRAM) integrated circuits, today announced its financial results for the second quarter and six months ended June 30, 2006.
Other highlights include:
-- Product Revenue $6.4 million for Q2 2006, $11.2 million for the first half 2006
-- Total Revenue $6.9 million for Q2 2006, $12.7 million for the first half 2006
-- Profitability Achieved for the Month of June
-- 4 Megabit nvSRAM Program with Cypress Well Underway
-- Record Design Wins Across Diverse Markets
In this and subsequent reports an accounting change has been, and will be, made in how the non-refundable advance royalty payments from Cypress Semiconductor are accounted for. The change, settled upon after consultation with the Company's independent accountants, results in adding approximately $1 million to Q1 2006 revenue and $0.5 million to Q2 2006 revenue, or $1.5 million in royalty revenue for the first six months of 2006. In this, and future reports, revenue will be reported for product sales, royalty revenue, and total revenue. Please refer to Simtek's related Form 8-K filed on July 26, 2006 for the effect on Q1 2006 financial statements.
Total revenue was $6.9 million for the second quarter of 2006, including royalty revenue of $0.5 million. Product sales for the second quarter were $6.4 million, an increase of 192% from $2.2 million in the second quarter of 2005, and an increase of 36% quarter-over-quarter compared to Q1 2006 product sales of $4.7 million. The Company reported a net loss for 2006's second quarter of $1.5 million or $0.01 per share, compared to a net loss of $2.9 million or $0.05 per share for the second quarter of 2005. Excluding the effects of stock options and amortization of acquisition related costs, the net loss was $0.9 million for the second quarter of 2006. There were no such charges in the 2005 period.
Total revenue for the first six months of 2006 was $12.7 million, including royalty revenue of $1.5 million. Product sales for the first six months of 2006 were $11.2 million, an increase of 115% from $5.2 million in the first six months of 2005. The Company reported a net loss for the six months ended June 30, 2006 of $2.4 million or $0.02 per share, compared to a net loss of $3.9 million or $0.06 per share for the same period in 2005. Excluding the effects of stock options and amortization of acquisition related costs, the net loss was $1.4 million for the 2006 period. There were no such charges in the 2005 period.
Simtek is guiding product revenue for the third quarter of 2006 to be in the range of $7.2 million to $7.5 million. The Company's order backlog, scheduled for delivery in the third quarter, stands at $5.5 million at June 30, 2006 and represents a larger percentage of guided revenue for the subsequent quarter than in prior quarters.
The Company is raising its guidance for total revenue for 2006 from $23 million to $27 million to $25 million to $30 million, including the impact of royalty revenue from the non-refundable payments received from Cypress Semiconductor.
Based on margin improvement and increasing revenue, the Company is guiding to be profitable on a pro-forma basis for the third and fourth quarters of 2006. There is no prepaid royalty installment expected in the third quarter.
Brian Alleman, CFO stated, "Achieving production qualification of the .25 micron 256 kilobit and real-time clock version of the 1 megabit devices, which the Company announced yesterday, is the culmination of several years of investment in process R&D and product development. We believe that the Company is now in a position to ramp current customer programs into production, and to aggressively cultivate new design wins. Product revenue for the first six months of 2006 exceeded total revenue for the full year 2005 by $800,000. For the month of June, Simtek achieved what we consider to be an even more significant goal, namely reaching profitability for the month. Focused ASP management, with a favorable shift in product mix and aggressive cost reduction efforts resulted in gross margins on product sales of just over 40% for the month."
Alleman continued, "The Company continues to work on reducing product costs, particularly on the .25 micron parts. We expect to be investing in the third quarter in continued cost reductions, yield enhancements, and back end test efficiencies. We have also successfully transferred offshore the final testing of our highest volume device family. The combination of these actions is projected to increase gross margins in Q3 2006 by as much as 500 basis points over Q2 2006."
Revenue is increasing from improved ASPs, a shift in mix toward higher ASP 1 megabit devices, and from significant increases in unit volumes shipped in several product families. In the European market, the unit volume of shipment of products from Simtek GmbH to customers in Europe increased by 66% quarter-over-quarter compared to Q1 2006. Unit volume shipped on a global basis increased by 36% quarter-over-quarter compared to Q1 2006. Compared to the first six months of 2005, total unit volume shipped to customers increased by 179%.
Simtek President and CEO, Harold Blomquist stated, "Growth is coming from customers around the world and from markets as diverse as storage/RAID (redundant arrays of independent disks) subsystems, automated meter reading systems, display subsystems in multiple application areas, and networking subsystems. Shipments of our 1 megabit family increased by 293% quarter-over-quarter and is showing steady increase in demand from recently awarded programs from Fortune 50 industry leaders in the RAID, and other market segments."
Blomquist went on to say, "We believe that design wins from new and existing customers, and from current and new market segments early in the year is unparalleled in our history and continues at a brisk pace. Market acceptance of our nvSRAM technology continues to broaden. Cypress Semiconductor Corp. reported in its earnings call last week that it has begun sampling high-speed nonvolatile SRAM devices obtained through its partnership with Simtek. Simtek is pleased with its collaboration with Cypress which is expected to provide first samples of a jointly developed 4 megabit device at the beginning of 2007, and which is opening doors to new customers with high-volume programs."
Following is reconciliation* of the Pro-forma financial measures
to the most comparable GAAP financial measures:
Three
Months Six Months
Unaudited Ended Ended
(Amounts in thousands, except per share June 30, June 30,
amounts) 2006 2006
Loss from Continuing Operations as reported $ (1,453) $ (2,354)
Adjusted-GAAP items:
Amortization of Non-compete Agreement 443 891
Costs associated with employee stock options 159 278
-----------------------
Pro-forma Loss from Continuing Operations $ (851) $ (1,185)
=======================
Per Share Data:
Loss from Continuing Operations as reported $ (0.01) $ (0.02)
Amortization of Non-compete Agreement $ - $ 0.01
Costs associated with employee stock options $ - $ -
-----------------------
Pro-forma Loss Per Share from Continuing
Operations $ (0.01) $ (0.01)
=======================
* pursuant to the requirements of Regulation G.
Simtek reports net income or loss in accordance with GAAP and
additionally uses pro-forma financial measures which are adjusted from
the most directly comparable GAAP financial measures to exclude
charges related to unusual or non-recurring expenses the Company may
incur from time to time, in order to provide additional comparative
information between periods. Management believes that these pro-forma
measures are important to investor understanding of the Company's
disclosures regarding past, current and future operating results.
As of June 30, 2006 there were 147,321,577 shares outstanding.
SIMTEK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value and share amounts)
ASSETS
June December
30, 31,
2006 2005
------ ------
CURRENT ASSETS: (Unaudited)
Cash and cash equivalents $ 2,265 $ 1,766
Restricted investments 1,975 2,281
Accounts receivable - trade, net 3,955 1,456
Inventory, net 3,979 2,068
Prepaid expenses and other current assets 387 699
---------- ----------
Total current assets 12,561 8,270
EQUIPMENT AND FURNITURE, net 803 571
DEFERRED FINANCING COSTS AND DEBT ISSUANCE COSTS 143 111
GOODWILL 992 876
NON-COMPETITION AGREEMENT 8,016 8,910
OTHER ASSETS 43 20
---------- ----------
TOTAL ASSETS $ 22,558 $ 18,758
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 4,539 $ 2,822
Accrued expenses 1,639 1,604
Obligation under capital leases - 13
Notes payable 558 -
Debentures, current 480 240
---------- ----------
Total current liabilities 7,216 4,679
DEBENTURES, NET OF CURRENT 2,520 2,760
---------- ----------
Total liabilities 9,736 7,439
Temporary equity, consisted of 68,750,000 shares
of common stock, $0.01 par value, subject to
cash penalties under registration rights
agreements, net of financing costs of $667,542 10,332 8,459
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 2,000,000
shares authorized, none issued - -
Common stock, $.01 par value; 300,000,000
shares authorized, 78,581,577 and 78,571,577
shares issued and outstanding at June 30,
2006 and 78,170,823 and 78,160,823 shares
issued and outstanding at December 31, 2005,
excluding temporary equity 786 782
Additional paid-in capital 50,187 48,282
Treasury stock, at cost; 10,000 shares (13) (13)
Accumulated deficit (48,545) (46,191)
Accumulated other comprehensive income:
Cumulative translation adjustment 75 -
---------- ----------
Total shareholders' equity 2,490 2,860
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 22,558 $ 18,758
========== ==========
SIMTEK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except share and per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
------ ------ ------ ------
REVENUE:
Product sales,
net $ 6,443 $ 2,204 $ 11,186 $ 5,180
Royalty revenue 483 - 1,518 -
-------------------------------------------------
Total revenue 6,926 2,204 12,704 5,180
Cost of sales 4,567 1,675 8,037 3,683
-------------------------------------------------
GROSS PROFIT 2,359 529 4,667 1,497
OPERATING EXPENSES:
Research and
development costs 1,678 1,917 3,223 3,126
Sales and
marketing 1,018 444 1,962 844
General and
administrative 1,083 987 1,782 1,274
-------------------------------------------------
Total
operating
expenses 3,779 3,348 6,967 5,244
-------------------------------------------------
LOSS FROM
CONTINUING
OPERATIONS (1,420) (2,819) (2,300) (3,747)
Total other expense (33) (50) (54) (103)
-------------------------------------------------
LOSS FROM
CONTINUING
OPERATIONS
BEFORE PROVISION
FOR INCOME TAXES (1,453) (2,869) (2,354) (3,850)
Provision for
income taxes - - - -
-------------------------------------------------
LOSS FROM
CONTINUING
OPERATIONS (1,453) (2,869) (2,354) (3,850)
LOSS FROM
DISCONTINUED
OPERATIONS - (36) - (68)
-------------------------------------------------
NET LOSS $ (1,453) $ (2,905) $ (2,354) $ (3,918)
=================================================
NET LOSS PER
COMMON SHARE:
Basic and diluted
Loss from
continuing
operations $ (.01) $ (.05) $ (.02) $ (.06)
Loss from
discontinued
operations (.00) (.00) (.00) (.00)
-------------------------------------------------
Total $ (.01) $ (.05) $ (.02) $ (.06)
=================================================
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic and diluted 147,044,131 63,226,984 147,044,131 65,299,377
==================================================
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