Zhone Technologies Reports Third Quarter 2009 Financial Results
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OAKLAND, Calif.--(BUSINESS WIRE)-- Zhone Technologies, Inc. (NASDAQ: ZHNE), a global leader in network access solutions, today reported its financial results for the third quarter ended September 30, 2009.
Revenue for the third quarter of 2009 was $36.0 million compared with $30.3 million for the second quarter of 2009 and $32.0 million for the third quarter of 2008. Net loss for the third quarter of 2009, calculated in accordance with generally accepted accounting principles ("GAAP"), was $1.2 million or $0.01 per share compared with a net loss of $2.3 million or $0.02 per share for the second quarter of 2009, and a net loss of $6.5 million or $0.04 per share for the third quarter of 2008. Pro forma earnings before stock-based compensation, interest, taxes, depreciation, restructuring, lease liability accrual, gain on sale of intangible assets and goodwill impairment ("EBITDA") was a $0.1 million profit for the third quarter of 2009, compared to a pro forma EBITDA loss of $0.9 million for the second quarter of 2009, and pro forma EBITDA loss of $4.6 million for the third quarter of 2008.
"Strong sequential revenue growth for the second straight quarter led to better than expected earnings. This revenue growth was driven by broad based deployment of our new products in the U.S. and abroad as we begin a new major product cycle for the company," stated Mory Ejabat, Zhone's chief executive officer. "As a result, we generated slightly positive proforma EBITDA ahead of schedule and are on track to improve proforma EBITDA profitability in the fourth quarter."
Zhone will conduct a conference call and audio webcast today, October 20, 2009, at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its third quarter 2009 results. This call is open to the public by dialing +1 (800) 237-9752 for U.S. callers and +1 (617) 847-8706 for international callers and then entering passcode 18383089. The audio webcast will be simultaneously available on the Investor Relations section of Zhone's website at http://www.zhone.com/investors/.
A replay of the conference call will be available after the original call by dialing +1 (888) 286-8010 for U.S. callers and +1 (617) 801-6888 for international callers and then entering passcode 48028058. An audio webcast replay will also be available online at http://www.zhone.com/investors/ for approximately one week following the original call.
Non-GAAP Financial Measures
To supplement Zhone's consolidated financial statements presented in accordance with GAAP, Zhone uses pro forma EBITDA, a non-GAAP measure Zhone believes is appropriate to enhance an overall understanding of Zhone's past financial performance and prospects for the future. These adjustments to GAAP results are made with the intent of providing greater transparency to supplemental information used by management in its financial and operational decision-making. These non-GAAP results are among the primary indicators that management uses as a basis for making operating decisions because they provide meaningful supplemental information regarding the company's operational performance, including the company's ability to provide cash flows to invest in research and development, and to fund capital expenditures. In addition, these non-GAAP financial measures facilitate management's internal comparisons to the company's historical operating results and comparisons to competitors' operating results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation between net loss calculated on a GAAP basis and pro forma EBITDA on a non-GAAP basis is provided in a table immediately following the Unaudited Condensed Consolidated Statements of Operations.
About Zhone Technologies -- Access for a Converging World
Zhone Technologies, Inc. (NASDAQ: ZHNE) is a global leader in multi-service access solutions, serving more than 700 of the world's most innovative network operators. The company offers the industry's only fully-integrated portfolio of MSAP, FTTx, EFM and Wi-Fi access technologies, improving network agility and reducing the costs of delivering the full spectrum of access services, including residential and business broadband, VoIP, and High-Definition IPTV over copper, fiber, and wireless. Zhone is headquartered in California, and its MSAP products are all manufactured in the USA, in a facility that is emission, waste-water, and CFC free.
Zhone, the Zhone logo, and all Zhone product names are trademarks of Zhone Technologies, Inc. Other brand and product names are trademarks of their respective holders.
Forward-Looking Statements
This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "target," "will," "would," variations of such words, and similar expressions are intended to identify forward-looking statements. In addition, forward-looking statements include, among others, statements that refer to third quarter 2009 financial estimates; projections of revenue, margins, expenses or other financial items; and improvement of financial markets. Readers are cautioned that actual results could differ materially from those expressed in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, commercial acceptance of our products; intense competition in the communications equipment market; our ability to execute on our strategy and operating plans; and economic conditions specific to the communications, networking, internet and related industries. In addition, please refer to the risk factors contained in the Company's SEC filings available at www.sec.gov, including without limitation, the Company's annual report on Form 10-K for the year ended December 31, 2008 and Zhone's quarterly report on Form 10-Q for the quarters ended June 30, 2009 and March 31, 2009. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Zhone undertakes no obligation to update or revise any forward-looking statements for any reason.
ZHONE TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September June 30, September September September
30, 30, 30, 30,
2009 2009 2008 2009 2008
Net revenue $ 36,016 $ 30,346 $ 32,020 $ 90,465 $ 115,122
Cost of 23,929 19,266 22,332 59,457 79,921
revenue
Stock-based 20 24 44 72 135
compensation
Gross profit 12,067 11,056 9,644 30,936 35,066
Operating
expenses:
Research and
product 5,338 5,565 6,480 16,699 20,780
development
(1)
Sales and 5,323 5,014 6,483 16,372 22,080
marketing (1)
General and
administrative 2,300 2,431 2,834 7,309 12,234
(1)
Gain on sale
of intangible - - - - (3,297 )
assets
Goodwill - - - - 70,401
impairment
Total
operating 12,961 13,010 15,797 40,380 122,198
expenses
Operating loss (894 ) (1,954 ) (6,153 ) (9,444 ) (87,132 )
Other expense, (302 ) (263 ) (326 ) (858 ) (496 )
net
Loss before (1,196 ) (2,217 ) (6,479 ) (10,302 ) (87,628 )
income taxes
Income tax 8 47 50 69 176
provision
Net loss $ (1,204 ) $ (2,264 ) $ (6,529 ) $ (10,371 ) $ (87,804 )
Basic and
diluted net $ (0.01 ) $ (0.02 ) $ (0.04 ) $ (0.07 ) $ (0.58 )
loss per share
Weighted
average shares
outstanding
used to 151,108 150,916 150,443 150,914 150,258
compute basic
and diluted
net loss per
share
(1) Amounts
include
stock-based
compensation
costs as
follows:
Research and
product 90 94 116 281 389
development
Sales and 104 110 146 328 412
marketing
General and 266 315 292 862 938
administrative
460 519 554 1,471 1,739
GAAP net loss $ (1,204 ) $ (2,264 ) $ (6,529 ) $ (10,371 ) $ (87,804 )
Stock-based 480 543 598 1,543 1,874
compensation
Interest 349 325 293 1,043 619
expense, net
Income taxes 8 47 50 69 176
Depreciation 446 468 573 1,406 1,708
Restructuring - - 380 - 380
Lease
liability - - - - 3,305
accrual
Gain on sale
of intangible - - - - (3,297 )
assets
Goodwill - - - - 70,401
impairment
Non-GAAP pro $ 79 $ (881 ) $ (4,635 ) $ (6,310 ) $ (12,638 )
forma EBITDA
ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
September 30, December 31,
2009 2008
Assets
Current assets:
Cash, cash equivalents and short-term investments $22,027 $36,243
Accounts receivable 31,990 23,665
Inventories 30,518 40,706
Prepaid expenses and other current assets 2,621 2,654
Total current assets 87,156 103,268
Property and equipment, net 18,994 20,003
Restricted cash 58 123
Other assets 41 55
Total assets $106,249 $123,449
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $10,525 $12,719
Line of credit 10,000 15,000
Current portion of long-term debt 403 380
Accrued and other liabilities 13,357 13,162
Total current liabilities 34,285 41,261
Long-term debt, less current portion 18,392 18,698
Other long-term liabilities 3,038 4,193
Total liabilities 55,715 64,152
Stockholders' equity:
Common stock 151 151
Additional paid-in capital 1,066,083 1,064,493
Other stockholders' equity 268 250
Accumulated deficit (1,015,968 ) (1,005,597 )
Total stockholders' equity 50,534 59,297
Total liabilities and stockholders' equity $106,249 $123,449
Source: Zhone Technologies, Inc.
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