Endwave Reports First Quarter FY 2010 Financial Results

SAN JOSE, Calif.--(BUSINESS WIRE)--

Endwave Corporation ENWV, a leading provider of high-frequency RF solutions and semiconductor products that serve markets such as telecommunications, satellite communications, electronic instruments and defense and security, today reported financial results for its first quarter, which ended on March 31, 2010.

On April 30, 2009, Endwave sold its Defense and Security RF module business (D&S). As a result, the Company’s financial statements reflect the D&S business as a discontinued operation.

Revenues for the first quarter of 2010 were $4.8 million. This compares with revenues from these same operations of $3.6 million in the prior quarter and $7.2 million in the first quarter of fiscal 2009. Loss from continuing operations, calculated in accordance with accounting principles generally accepted in the United States (GAAP), for the first quarter of 2010 was $1.3 million, or $0.13 per share. This compares with a loss from continuing operations of $3.4 million, or $0.36 per share in the prior quarter, and a loss from continuing operations of $2.6 million or $0.28 per share in the first quarter of fiscal 2009.

Non-GAAP Results from Continuing Operations

Non-GAAP net loss in the first quarter of 2010 was $966,000, or $0.10 per share. This compares with non-GAAP net loss of $2.0 million, or $0.21 per share in the prior quarter and non-GAAP net loss of $919,000, or $0.10 per share in the first quarter of fiscal 2009.

For the first quarter of 2010, non-GAAP net loss was calculated by excluding non-cash stock-based compensation expense of $331,000 and the reversal of certain restructuring charges that resulted in a gain of $14,000. For the fourth quarter of 2009 non-GAAP net loss was calculated by excluding certain restructuring charges of $1.2 million, inventory reserves and bad debt expense due to a customer liquidation of $191,000 and non-cash stock-based compensation expense of $32,000. For the year ago period, non-GAAP net loss was calculated by excluding restructuring charges of $1.1 million and non-cash stock-based compensation expense of $607,000.

Cash, cash equivalents and investments as of March 31, 2010 were $29.4 million, compared with $66.5 million as of December 31, 2009. On January 21, 2010, the Company repurchased all 300,000 shares of Endwave preferred stock from Oak Investment Partners XI, Limited Partnership (Oak Investments) for $36.0 million in cash. Including deal related fees and expenses, the total cost of the repurchase was $36.2 million and the repurchase resulted in a corresponding decrease to cash, cash equivalents and investments.

“In the first quarter, we were pleased to see revenues from our core RF solutions business increase, while our operating losses were significantly reduced,” said John Mikulsky, Endwave’s President and Chief Executive Officer. “As we begin our new fiscal year, we are encouraged by these financial improvements, along with the continued strength of our balance sheet. In addition, our new semiconductor product line is gaining traction in the market place.”

Conference Call

Endwave Corporation will hold a conference call to discuss its financial results today at 1:30 p.m. Pacific Time (PT). Investors are invited to participate in the conference call by dialing (480) 629-9643 (Conference ID: 4282078) by 1:20 p.m. PT. Starting approximately one hour after the completion of the live call, a replay will also be available until May 5. To access the recording, dial (303) 590-3030 (Access Code: 4282078). Investors are also invited to listen to a live and/or archived webcast of Endwave's quarterly conference call on the investor relations section of the Company's website at www.endwave.com. The webcast replay will be available for 90 days.

About Endwave

Endwave Corporation designs, manufactures and markets high frequency RF solutions and semiconductor products that enable the transmission, reception and processing of high-frequency signals in the telecommunications, satellite communications, electronic instruments and defense and security markets. Endwave has 43 issued patents covering its core technologies including semiconductor and proprietary circuit designs. Endwave Corporation is headquartered in San Jose, CA, with operations in Salem, NH and Chiang Mai, Thailand. Additional information about the Company can be accessed from the Company’s web site at http://www.endwave.com.

Use of Non-GAAP Financial Information

To supplement Endwave's condensed consolidated financial statements presented in accordance with GAAP, Endwave uses certain measures of financial performance that are non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. These non-GAAP measures may include gross margin, net income (loss) and net income (loss) per share data that are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors’ overall understanding of Endwave’s current financial performance and Endwave’s prospects for the future. Specifically, Endwave believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures included in this press release have been reconciled to the GAAP results in the attached tables.

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

This press release and the conference call referred to in this press release may contain forward-looking statements within the meaning of the Federal securities laws and is subject to the safe harbor created thereby. Any statements contained in this press release or on the conference call that are not statements of historical fact may be deemed to be forward-looking statements. Words such as “plans,” “intends,” “expects,” “believes” and similar expressions are intended to identify these forward-looking statements. Information contained in forward-looking statements is based on current expectations and is subject to change. Actual results could differ materially from the forward-looking statements due to many factors, including the following: global economic conditions and their impact on our customers; our new semiconductor product line; our suppliers’ abilities to deliver raw materials to our specifications and on time; our customer and market concentration; volatility resulting from consolidation of key customers; our ability to achieve revenue growth and maintain profitability; our successful implementation of next-generation programs, including inventory transitions; our ability to penetrate new markets; fluctuations in our operating results from quarter to quarter; our reliance on third-party manufacturers and semiconductor foundries; acquiring businesses and integrating them with our own; component, design or manufacturing defects in our products; our dependence on key personnel; our ability to develop new or improved semiconductor process technologies; and fluctuations in the price of our common stock. Forward-looking statements contained in this press release and on our conference call should be considered in light of these factors and those factors discussed from time to time in Endwave's public reports filed with the Securities and Exchange Commission, such as those discussed under “Risk Factors” in Endwave’s most recent Annual Report on Form 10-K and subsequently-filed reports on Form 10-Q. Endwave does not undertake any obligation to update such forward-looking statements.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
		March 31, 2010			December 31, 2009
Assets
Current assets
Cash and cash equivalents		$	20,222		$	55,158
Short-term investments			9,219			11,307
Accounts receivables, net			2,634			3,009
Inventories			5,543			4,879
Other current assets			791			788
Total current assets			38,409			75,141
Property and equipment, net			1,934			1,796
Other assets			93			179
Total assets		$	40,436		$	77,116
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	2,407		$	1,726
Accrued warranty			1,124			1,087
Accrued compensation			655			590
Other current liabilities			747			996
Total current liabilities			4,933			4,399
Other long-term liabilities			655			765
Total stockholders' equity			34,848			71,952
Total liabilities and stockholders' equity		$	40,436		$	77,116

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
		Three months ended
		March 31, 2010				March 31, 2009
Total revenues		$	4,834			$	7,242
Costs and expenses:
Cost of product revenues			3,391				4,819
Research and development			1,006				1,705
Sales and marketing			584				579
General and administrative			1,131				1,779
Restructuring			(14	)			1,067
Total costs and expenses			6,098				9,949
Loss from continuing operations			(1,264	)			(2,707	)
Interest and other income (expense), net			(19	)			106
Loss from continuing operations before benefit from income taxes			(1,283	)			(2,601	)
Benefit from income taxes			-				(8	)
Loss from continuing operations			(1,283	)			(2,593	)
Loss from discontinued operations, net of tax			-				(1,067	)
Net loss		$	(1,283	)		$	(3,660	)
Basic and diluted net loss per share from continuing operations		$	(0.13	)		$	(0.28	)
Basic and diluted net loss per share from discontinued operations		$	-			$	(0.11	)
Basic and diluted net loss per share		$	(0.13	)		$	(0.39	)
Shares used in calculating basic and diluted net loss per share			9,701,126				9,346,568

NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(in thousands, except share and per share amounts)
(unaudited)
		Three months ended
		March 31, 2010				March 31, 2009
Total revenues		$	4,834			$	7,242
Costs and expenses:
Cost of product revenues			3,338				4,738
Research and development			911				1,577
Sales and marketing			516				471
General and administrative			1,016				1,489
Total costs and expenses			5,781				8,275
Loss from operations			(947	)			(1,033	)
Interest and other income (expense), net			(19	)			106
Loss before benefit from income taxes			(966	)			(927	)
Benefit from income taxes			-				(8	)
Net loss		$	(966	)		$	(919	)
Basic and diluted net loss per share		$	(0.10	)		$	(0.10	)
Shares used in calculating basic and diluted net loss per share			9,701,126				9,346,568

Basis of presentation:
1.		Non-GAAP operating results exclude non-cash stock compensation expense, restructuring and discontinued operations.

GAAP TO NON-GAAP NET LOSS RECONCILIATION
(in thousands)
(unaudited)
		Three months ended
		March 31, 2010				March 31, 2009
GAAP net loss		$	(1,283	)		$	(3,660	)
Cost of product revenues, stock-based compensation expense			53				81
Research and development, stock-based compensation expense			95				128
Sales and marketing, stock-based compensation expense			68				108
General and administrative, stock-based compensation expense			115				290
Restructuring			(14	)			1,067
Loss from discontinued operations, net of tax			-				1,067
Non-GAAP net loss		$	(966	)		$	(919	)