Conexant Exceeds Guidance for Fourth Quarter of Fiscal 2009
Conexant Systems, Inc. (NASDAQ: CNXT) today announced that financial results for the fourth quarter of fiscal 2009 exceeded the guidance provided at the beginning of the quarter. The company also said that its imaging and audio businesses grew 18 percent on a sequential basis and accounted for 58 percent of total revenues.
Fourth 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.
On August 24, 2009 Conexant announced the completion of the sale of its Broadband Access product lines to Ikanos Communications, Inc. for $54 million. The financial results of the Broadband Access business unit have been classified as discontinued operations in Conexant’s fourth fiscal quarter financial statements.
Conexant’s core net revenues for the fourth quarter of fiscal 2009 were $56.2 million. Core gross margins were 60.2 percent of revenues. Core operating expenses were $25 million, and core net income was $3.5 million, or $0.07 per share.
On a GAAP basis, net revenues for the fourth quarter of fiscal 2009 were $56.2 million. GAAP gross margins were 60.4 percent of revenues. GAAP operating expenses of $37 million included restructuring charges of $5.6 million associated with unutilized leases and a previously announced reduction in force, and asset impairments of $5.6 million. GAAP loss from continuing operations was $7.7 million. GAAP loss from discontinued operations was $5.5 million, offset by a gain of $36.7 million on the sale of the Broadband Access business. GAAP net income was $23.5 million, or $0.47 per diluted share.
The company ended the quarter with $125.4 million in cash and cash equivalents, compared to $123.4 million in the previous quarter. Fourth fiscal quarter cash and cash equivalents included the initial proceeds of $18.4 million from a public offering of common stock that raised a total amount of $21.2 million. During the quarter, the company retired an aggregate amount of $80 million of its senior secured notes due in November 2010.
Financial-performance and Business Perspective
“For the fourth fiscal quarter, the Conexant team again delivered performance that exceeded our expectations on all financial metrics,” said Scott Mercer, Conexant’s chairman and chief executive officer. “Fourth quarter revenues of $56.2 million were better than the $54 million we anticipated entering the quarter and increased 10 percent from third quarter revenues of $50.8 million. Fourth quarter core gross margin of 60.2 percent was 40 basis points higher than core gross margin of 59.8 percent in the previous quarter. Core operating expenses of $25 million were lower than the approximately $27 million we anticipated and compared to $26.8 million in the third quarter. Core operating income of $8.8 million was above the $6 million we expected and compared to $3.6 million in the prior quarter. Core net income was $3.5 million, or $0.07 per share, rather than the $0.01 to $0.02 per share we anticipated entering the quarter.
“In our imaging and audio businesses, where we have focused our product-development and acquisitions efforts, we delivered fourth quarter sequential growth of 18 percent,” Mercer said. “Together, these two businesses accounted for 58 percent of our total revenues.
“The recent sale of our Broadband Access business represented the completion of our restructuring strategy, which included the termination of new investments in wireless networking, the divestiture of our Broadband Media Processing business, and the strengthening of our product portfolio with targeted acquisitions,” Mercer said. “Conexant today is a company transformed. We are now a smaller, more profitable enterprise focused on delivering operational excellence and innovative solutions for imaging, audio, embedded-modem, and video applications. In each of these areas, we have established leadership positions.
“With a proven team, an outstanding IP portfolio, and a customer list that includes worldwide industry leaders, we plan to grow by capturing market share with existing designs and delivering new products for the areas we currently serve. In addition, we plan to apply our core capabilities in analog and mixed-signal design and firmware and software development to capitalize on new opportunities in adjacent markets.”
First Fiscal Quarter Business Outlook
Conexant expects revenues for the first quarter of fiscal 2010 to be approximately $60 million. Core gross margins for the first quarter are expected to be about 60 percent of revenues. The company anticipates that core operating expenses will be approximately $25 million, which includes reinstatement of performance-based employee incentive plans. As a result, the company expects that first quarter core operating income will be approximately $11 million, with core net income of approximately $0.11 per share based on approximately 60 million shares outstanding.
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). Conexant senior management will discuss fourth 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: 35114866.
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 U.S. and Canada) or 706-645-9291 (from other international locations); Conference ID number: 35114866.
Conexant’s comprehensive portfolio of innovative semiconductor solutions includes products for imaging, audio, embedded-modem, and video applications. Conexant is a fabless semiconductor company headquartered in Newport Beach, Calif. For more information, 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 are also 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: The availability of manufacturing capacity; changes in our product mix; 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, which is subject to significant downturns that may negatively impact our business, financial condition, cash flow, and results of operations; the cyclical nature of the markets addressed by our products and our customers’ products; volatility in the technology sector and the semiconductor industry; the risk that capital needed for our business and to repay our indebtedness will not be available when needed; our successful development of new products; the timing of our new product introductions and our product quality; demand for and market acceptance of our new and existing products; our ability to anticipate trends and develop products for which there will be market demand; product obsolescence; the ability of our customers to manage inventory; our ability to identify and execute acquisitions, divestitures, mergers or restructurings, as deemed appropriate by management; the financial risks of default by tenants and subtenants in the space we own or lease; the risk that the value of our common stock may be adversely affected by market volatility or failure to meet all applicable listing requirements of the NASDAQ Global Market; 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.