Endwave Reports Third Quarter 2009 Financial Results

October 27, 2009 4:00 PM EDT

SAN JOSE, Calif.--(BUSINESS WIRE)-- Endwave Corporation (Nasdaq: ENWV), a leading provider of high-frequency RF solutions for mobile communications networks, today reported financial results for its third quarter of 2009, which ended on September 30, 2009.

On April 30, 2009, Endwave sold its defense electronics and security (D&S) business for $28 million in cash. The Company's financial statements reflect the D&S business as a discontinued operation.

Revenues from continuing operations for the third quarter of 2009 were $3.1 million. This compares with revenues from these same operations of $5.6 million in the prior quarter and $10.9 million in the year ago period. Net loss from continuing operations, calculated in accordance with accounting principles generally accepted in the United States (GAAP), for the third quarter of 2009 was $2.6 million, or $0.27 per share. This compares with a net loss from continuing operations of $2.0 million, or $0.21 per share, in the prior quarter, and a net loss from continuing operations of $173,000, or $0.02 per share in the year ago period.

Non-GAAP Results from Continuing Operations

Non-GAAP net loss in the third quarter of 2009 was $1.7 million, or $0.18 per share. This compares with non-GAAP net loss of $1.4 million, or $0.15 per share in the prior quarter and non-GAAP net income of $599,000, or $0.05 per diluted share in the year ago period.

For the third quarter of 2009, non-GAAP net loss was calculated by excluding non-cash stock-based compensation expense of $939,000, income from discontinued operations, net of tax of $41,000 and the reversal of certain restructuring charges that resulted in a gain of $21,000. For the second quarter of 2009, non-GAAP net loss was calculated by excluding income from discontinued operations of $18.6 million, non-cash stock-based compensation expense of $407,000 and restructuring charges of $166,000. For the third quarter of 2008, non-GAAP net loss was calculated by excluding non-cash stock-based compensation expense of $772,000 and loss from discontinued operations of $826,000.

Cash, cash equivalents and investments as of September 30, 2009 were $68.2 million, compared with $68.7 million as of June 30, 2009.

"We are pleased with our management of cash flow in spite of the reduced level of revenue during the quarter," said Curt Sacks, Endwave's Senior Vice President and Chief Financial Officer. "In the face of the current economic challenges we will continue to carefully manage our cash and maintain a strong balance sheet."

"While we are disappointed in our revenues for the third quarter, we continue to position ourselves for long-term success," noted John Mikulsky, Endwave's President and Chief Operating Officer. "As announced in September, we have launched a new product line of microwave and millimeter wave integrated circuits with the goal of expanding our business opportunities, and driving revenue as the economy improves."

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) 629-9726 (Conference ID: 4164788) by 1:20 p.m. PT. Starting approximately one hour after the completion of the live call, a replay will also be available until November 3. To access the recording, dial (303) 590-3030 (Access Code: 4164788). 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 RF solutions that enable the transmission, reception and processing of high-frequency signals in mobile communications networks. Endwave has 41 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; volatility resulting from consolidation of key customers; our ability to achieve revenue growth and maintain profitability; our customer and market concentration; our suppliers' abilities to deliver raw materials to our specifications and on time; 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; 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)

                                           September 30, 2009  December 31, 2008

Assets

Current assets

Cash and cash equivalents                  $ 46,507            $ 33,998

Short-term investments                       21,731              11,350

Accounts receivables, net                    2,069               4,762

Inventories                                  6,155               14,454

Other current assets                         1,025               738

Total current assets                         77,487              65,302

Property and equipment, net                  1,891               4,220

Other assets                                 190                 218

Restricted cash                              -                   600

Total assets                               $ 79,568            $ 70,340

Liabilities and stockholders' equity

Current liabilities:

Accounts payable                           $ 1,589             $ 2,263

Accrued warranty                             1,162               2,439

Accrued compensation                         712                 2,811

Other current liabilities                    718                 713

Total current liabilities                    4,181               8,226

Other long-term liabilities                  111                 73

Total stockholders' equity                   75,276              62,041

Total liabilities and stockholders' equity $ 79,568            $ 70,340

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

               Three months ended            Nine months ended

               September 30,  September 30,  September 30,  September 30, 2008
               2009           2008           2009

Total revenues $ 3,126        $ 10,871       $ 15,948       $ 33,424

Costs and
expenses:

Cost of
product          2,369          7,005          11,425         22,100
revenues

Research and     1,452          1,736          4,463          4,577
development

Selling,
general and      1,968          2,595          6,261          8,131
administrative

Restructuring    (21       )    -              1,212          -

Total costs      5,768          11,336         23,361         34,808
and expenses

Loss from
continuing       (2,642    )    (465      )    (7,413    )    (1,384    )
operations

Interest and
other income     (3        )    292            197            1,025
(expense), net

Loss from
continuing
operations       (2,645    )    (173      )    (7,216    )    (359      )
before
provision for
income taxes

Provision
(benefit) for    (11       )                   (32       )    22
income taxes

Loss from
continuing       (2,634    )    (173      )    (7,184    )    (381      )
operations

Income (loss)
from
discontinued     41             (826      )    17,571         (3,314    )
operations,
net of tax

Net income     $ (2,593    )  $ (999      )  $ 10,387       $ (3,695    )
(loss)

Basic and
diluted net
loss per share $ (0.27     )  $ (0.02     )  $ (0.76     )  $ (0.04     )
from
continuing
operations

Basic and
diluted net
income (loss)  $ 0.00         $ (0.09     )  $ 1.85         $ (0.36     )
per share from
discontinued
operations

Basic and
diluted net    $ (0.27     )  $ (0.11     )  $ 1.10         $ (0.40     )
income (loss)
per share

Shares used in
calculating
basic and        9,625,583      9,216,760      9,477,516      9,182,041
diluted net
income (loss)
per share

NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)

(in thousands, except share and per share amounts)

(unaudited)

               Three months ended           Nine months ended

               September 30,  September     September 30, 2009  September
               2009           30, 2008                          30, 2008

Total revenues $ 3,126        $ 10,871      $ 15,948            $ 33,424

Costs and
expenses:

Cost of
product          2,289          6,901         11,235              21,810
revenues

Research and     1,266          1,585         4,089               4,107
development

Selling,
general and      1,295          2,078         4,872               6,518
administrative

Total costs      4,850          10,564        20,196              32,435
and expenses

Income (loss)
from             (1,724    )    307           (4,248    )         989
operations

Interest and
other income     (3        )    292           197                 1,025
(expense), net

Income (loss)
before           (1,727    )    599           (4,051    )         2,014
provision for
income taxes

Provision
(benefit) for    (11       )    -             (32       )         22
income taxes

Net income     $ (1,716    )  $ 599         $ (4,019    )       $ 1,992
(loss)

Basic net
income (loss)  $ (0.18     )  $ 0.06        $ (0.42     )       $ 0.22
per share

Diluted net
income (loss)  $ (0.18     )  $ 0.05        $ (0.42     )       $ 0.16
per share

Shares used in
calculating
basic net        9,625,583      9,216,760     9,477,516           9,182,041
income (loss)
per share

Shares used in
calculating
diluted net      9,625,583      12,344,673    9,477,516           12,330,665
income (loss)
per share

Basis of
presentation:

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

GAAP TO NON-GAAP NET INCOME (LOSS) RECONCILIATION

(in thousands)

(unaudited)

                Three months ended           Nine months ended

                September 30, September 30,  September 30, 2009 September 30,
                2009          2008                              2008

GAAP net income $ (2,593 )    $ (999 )       $ 10,387           $ (3,695 )
(loss )

Cost of product
revenues,
stock-based       80            104            190                290
compensation
expense

Research and
development,
stock-based       186           151            374                470
compensation
expense

Selling,
general and
administrative,   673           517            1,389              1,613
stock-based
compensation
expense

Restructuring     (21    )      -              1,212              -

(Income) loss
from
discontinued      (41    )      826            (17,571 )          3,314
operations, net
of tax

Non-GAAP net    $ (1,716 )    $ 599          $ (4,019  )        $ 1,992
income (loss)

    Source: Endwave Corporation

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