Financial Results
Conexant presents financial results based on accounting principles generally accepted in the United States of America (GAAP) as well as selected 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 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 first quarter of fiscal 2008 were $197.0 million, and core gross margins were 50.5 percent of revenues. Core operating expenses were $80.3 million. Core operating income was $19.1 million, and the core net income was $9.4 million, or $0.02 per diluted share.
As was previously communicated, Conexant's first quarter fiscal 2008 financial results were positively affected by the inclusion of $14.7 million of non-recurring revenue that resulted from the buyout of a future royalty stream. Excluding the impact of the royalty payment, revenues for the first fiscal quarter were $182.3 million, gross margins were 46.5 percent of revenues, and core operating income was $4.4 million.
On a GAAP basis, gross margins for the first quarter of fiscal 2008 were 50.4 percent of revenues. GAAP operating expenses were $94.2 million. GAAP operating income was $5.1 million, and the GAAP net loss was $9.2 million, or $0.02 per share.
The company ended the quarter with $232.1 million in cash and cash equivalents.
Business Perspective
"The Conexant team delivered first fiscal quarter performance that exceeded our expectations entering the quarter," said Dan Artusi, Conexant president and chief executive officer. "Even without the impact of the one-time royalty payment, we delivered breakeven financial performance on a core operating basis, which had been our highest company priority.
"For the past six months, we have been concentrating on reducing expenses, narrowing our product-development focus, and improving our financial performance," Artusi said. "We have made significant progress, but we still have more work to do in these areas.
"For semiconductor companies such as Conexant that address consumer electronics markets, the March quarter is traditionally weaker on a sequential basis, but our team is committed to building a track record of consistently delivering improved profitability over the next several quarters," Artusi said. "We will also continue to focus on the actions necessary to deliver profitable growth. We look forward to providing more detail on these plans at the appropriate time."
Business Outlook
Conexant expects revenues for the second quarter of fiscal 2008 to be in a range between $165 and $170 million.
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 / 2:00 p.m. Pacific Time. Dan Artusi, president and chief executive officer, and Karen Roscher, senior vice president and chief financial officer, will discuss first fiscal quarter financial results and the company's outlook.
To listen to the conference call via telephone, dial 866-650-4882 (in the US and Canada) or 706-679-7338 (from other international locations); security code: Conexant. To listen via the Internet, visit the Investor Relations section of Conexant's Web site at www.conexant.com/ir. Playback of the conference call will be available shortly after the call concludes and will be accessible on Conexant's Web site at www.conexant.com/ir or by calling 800-642-1687 (in the US and Canada) or 706-645-9291 (from other international locations); pass code: 30394628.
About Conexant
Conexant's comprehensive portfolio of innovative semiconductor solutions includes products for Internet connectivity, digital imaging, and media processing applications. Conexant is a fabless semiconductor company that recorded revenues of $809 million in fiscal year 2007. The company is headquartered in Newport Beach, Calif. To learn more, please visit www.conexant.com
Safe Harbor Statement
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as Conexant or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements in this release that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.
These risks and uncertainties include, but are not limited to: pricing pressures and other competitive factors; our ability to timely develop and implement new technologies and to obtain protection for the related intellectual property; the cyclical nature of the semiconductor industry and the markets addressed by our products and our customers' products; continuing volatility in the technology sector and the semiconductor industry; our successful development of new products; the timing of our new product introductions and our product quality; our ability to anticipate trends and develop products for which there will be market demand; the availability of manufacturing capacity; changes in our product mix; product obsolescence; the ability of our customers to manage inventory; demand for and market acceptance of our new and existing products; the risk that capital needed for our business and to repay our indebtedness will not be available when needed; the risk that the value of our common stock may be adversely affected by market volatility; the substantial losses we have incurred; the uncertainties of litigation, including claims of infringement of third-party intellectual property rights or demands that we license third-party technology, and the demands it may place on the time and attention of our management and the expense it may place on our company; general economic and political conditions and conditions in the markets we address; and possible disruptions in commerce related to terrorist activity or armed conflict, as well as other risks and uncertainties, including those detailed from time to time in our Securities and Exchange Commission filings.
The forward-looking statements are made only as of the date hereof. We undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
Conexant is a registered trademark of Conexant Systems, Inc. Other brands and names contained in this release are the property of their respective owners.
CONEXANT SYSTEMS, INC.
GAAP Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
Fiscal Quarter Ended
-----------------------------------------
December 28, September 28, December 29,
2007 2007 2006
------------- -------------- ------------
Net revenues (Note 1) $196,958 $ 183,921 $245,534
Cost of goods sold 97,687 102,973 136,045
------------- -------------- ------------
Gross margin 99,271 80,948 109,489
Operating expenses:
Research and development 60,390 69,000 71,450
Selling, general and
administrative 23,101 26,517 27,476
Amortization of intangible
assets 4,781 4,784 6,238
Asset impairments 130 192,498 --
Special charges (Note 2) 5,784 26,359 2,898
------------- -------------- ------------
Total operating
expenses 94,186 319,158 108,062
------------- -------------- ------------
Operating income (loss) 5,085 (238,210) 1,427
Interest expense 11,563 11,381 13,036
Other (expense) income, net
(Note 3) (5,345) 9,771 8,360
------------- -------------- ------------
Income (loss) before income
taxes and gain (loss) of
equity method investments (11,823) (239,820) (3,249)
Provision for income taxes 1,168 1,933 471
------------- -------------- ------------
Loss before gain (loss) of
equity method investments (12,991) (241,753) (3,720)
Gain (loss) of equity method
investments 3,773 6,988 4,696
------------- -------------- ------------
Net income (loss) $ (9,218) $(234,765) $ 976
============= ============== ============
Basic net income (loss) per
share $ (0.02) $ (0.48) $ 0.00
============= ============== ============
Diluted net income (loss)
per share $ (0.02) $ (0.48) $ 0.00
============= ============== ============
Shares used in basic per-
share computation 492,363 491,770 485,957
============= ============== ============
Shares used in diluted per-
share computation 492,363 491,770 492,583
============= ============== ============
Note 1 - Net revenues includes $14.7 million for the buyout of a
future royalty stream.
Note 2 - Special charges includes restructuring charges and legal
charges. Restructuring charges were $6.8 million, $4.1 and $2.9
million for the three months ended December 28 and September 28, 2007
and December 29, 2006, respectively. Legal charges include the
settlement with Orckit Communications Ltd of $18.6 million in the
three months ended September 28, 2007.
Note 3 - Other income (expense), net for the three months ended
December 28, 2007 includes expense of $8.4 million related to the
decrease in the fair value of our Mindspeed warrant offset by
interest income of $2.8 million. For the three months ended September
28, 2007 other income (expense), net includes a gain of $16.3 million
that resulted from the sale of our investment in Skyworks Solutions,
Inc. For the three months ended December 29, 2006, other income
(expense), net includes interest income of $5.4 million and a $3.0
million gain on the increase in fair value of our Mindspeed warrant.
