Phoenix Technologies Ltd. Reports First Quarter Fiscal 2009 Financial Results
(Logo: http://www.newscom.com/cgi-bin/prnh/20070410/SFTU048LOGO)
First Quarter Fiscal 2009 and Recent Highlights:
- Total revenues were
$17.4 million , unchanged from$17.4 million in Q1 FY2008; - GAAP net loss was (
$9.3 million ), or($0.33) per share, compared with a net income of$2.5 million , or$0.09 per diluted share in Q1 FY2008; - Non-GAAP net loss, adjusted to exclude non-cash charges for amortization of intangible assets, restructuring charges and stock-based compensation, was (
$5.0 million ), or($0.18) per share, compared with a non-GAAP net income of$3.7 million , or$0.13 per diluted share in Q1 FY2008; - Announced agreements with Lenovo, Samsung and a Fortune 100 PC OEM to provide Phoenix FailSafe(TM) theft deterrence and data loss protection for notebooks;
- Launched consumer versions of its flagship product, HyperSpace(TM), on
January 6, 2009 at the Consumer Electronics Showcase (CES) inLas Vegas ; - Announced an OEM partnership with ASUS on
January 20, 2009 to install HyperSpace into its next-generation notebooks.
“Despite the industry-wide weakness in end-user demand for PCs during the December quarter and aggressive inventory reductions in the global PC supply chain, we are pleased that revenue growth from our new products and services was sufficient to offset declines in our core system revenues and resulted in total revenues that were level with those reported in the year-ago period,” stated
Mr. Hobbs continued, “We remained committed to our previously stated intentions to support our new products and are encouraged by the favorable reaction of our major customers to both FailSafe and HyperSpace, and by the significant new customer agreements signed for each of these products. Furthermore, we are extremely pleased with the positive feedback we have received from industry analysts and the general press following the successful launch of our consumer versions of HyperSpace at CES earlier this month, where it won the coveted CES ‘Readers’ Choice’ award. More importantly, we recently announced the signing of an OEM agreement with the fastest growing notebook brand, ASUS, to incorporate HyperSpace into its next-generation notebooks.”
First Quarter Fiscal 2009 Financial Summary
Total revenues for the first quarter of fiscal 2009 ended
Mr. Hobbs concluded, “Phoenix is pursuing a product strategy that affords it the opportunity to dominate a total addressable market much greater than that of core system software. As such, our focus in fiscal 2009 is to generate new product revenue via partnerships and integration efforts with hardware and software vendors, and we are already demonstrating strong execution on this front. At the same time, the economic climate remains challenging. We are therefore taking a prudent approach to managing the company’s operations in coming quarters and expect to more closely match anticipated revenues to projected expenses going forward while continuing to focus on Phoenix Technologies’ long-term value to the benefit of our shareholders.”
Conference Call Dial-in Details:
The Company will conduct its regularly scheduled quarterly financial announcement conference call today,
About Phoenix Technologies
Phoenix Technologies Ltd. (NASDAQ: PTEC) is the global market leader in system firmware that provides the most secure foundation for today’s computing environments. The PC industry’s top system builders and specifiers trust
Use of Non-GAAP Financial Information
To supplement
Safe Harbor
The statements set forth above include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding our ability to improve our financial performance, the continued positive reception of our HyperSpace products, the adequacy of our financial resources, our ability to generate new product revenue in fiscal 2009, our relationships with our partners, and our ability to create long-term shareholder value. These statements involve risk and uncertainties, including: our dependence on key customers; our ability to successfully enhance existing products and develop and market new products and technologies; our ability to achieve profitability; our ability to meet our capital requirements in the long-term and achieve positive cash flow from operations; our ability to attract and retain key personnel; product and price competition in our industry and the markets in which we operate; our ability to successfully compete in new markets where we do not have significant prior experience; our ability to maintain the average selling price of our Core System Software for Netbooks; end-user demand for products incorporating our products and services; the ability of our customers to introduce and market new products that incorporate our products and services; risks associated with any acquisition strategy that we might employ; results of litigation; failure to protect our intellectual property rights; changes in our relationship with leading software and semiconductor companies; the rate of adoption of new operating system and microprocessor design technology; risks associated with our international sales and operating internationally, including currency fluctuations, acts of war or terrorism, and changes in laws and regulations relating to our employees in international locations; whether future restructurings become necessary; our ability to increase the number of volume purchase agreements and pay-as-you-go arrangements with customers; any material weakness in our internal controls over financial reporting; our ability to convert free users to paid customers and retain customers for our subscription services; storage of confidential customer information; our ability to effectively manage our rapid growth; defects or errors in our products and services; consolidation in the industry we operate in; reliance on internet infrastructure; risk associated with usage of open source software; our dependence on third party service providers; changes in financial accounting standards and our cost of compliance; the effects of any software viruses or other breaches of our network security, power shortages and unexpected natural disasters; trends regarding the use of the x86 microprocessor architecture for personal computers and other digital devices; and changes in our effective tax rates. For a further list and description of risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements in this release, we refer you to the Company’s filings with the Securities and Exchange Commission, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q. All forward-looking statements included in this document are based upon assumptions, forecasts and information available to the Company as of the date hereof, and the Company assumes no obligation to update any such forward-looking statements.
Investor Relations Contacts:
Phoenix Technologies Ltd.
Richard Arnold
Chief Operating Officer and Chief Financial Officer
Tel. +1 408 570 1256
investor_relations@phoenix.com
The Piacente Group, Investor Relations Counsel
Sanjay M. Hurry
Tel. +1 212 481 2050
phoenix@thepiacentegroup.com
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PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December September
31, 2008 30, 2008
Assets
Current assets:
Cash and cash equivalents $31,219 $37,721
Accounts receivable, net of allowances 4,889 6,246
Other assets - current 8,851 8,190
Total current assets 44,959 52,157
Property and equipment, net 4,988 4,125
Purchased technology and other intangible
assets, net 21,280 22,323
Goodwill 55,183 54,943
Other assets - noncurrent 3,132 2,994
Total assets $129,542 $136,542
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $3,413 $2,855
Accrued compensation and related
liabilities 3,466 6,050
Deferred revenue 15,054 15,010
Income taxes payable - current 3,634 4,099
Accrued restructuring charges - current 354 658
Other liabilities - current 9,845 10,318
Total current liabilities 35,766 38,990
Accrued restructuring charges - noncurrent 49 8
Income taxes payable - noncurrent 14,680 13,629
Other liabilities - noncurrent 2,666 2,508
Total liabilities 53,161 55,135
Stockholders' equity:
Preferred stock - -
Common stock 30 29
Additional paid-in capital 239,495 235,562
Accumulated deficit (71,130) (61,786)
Accumulated other comprehensive loss (47) (466)
Less: Cost of treasury stock (91,967) (91,932)
Total stockholders' equity 76,381 81,407
Total liabilities and stockholders'
equity $129,542 $136,542
See notes to unaudited condensed consolidated financial statements
PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three months ended
December September December
31, 2008 30, 2008 31, 2007
Revenues:
License fees $14,484 $17,249 $15,409
Subscription fees 448 112 -
Service fees 2,434 2,641 1,955
Total revenues 17,366 20,002 17,364
Cost of revenues:
License fees 88 98 159
Subscription fees 306 144 -
Service fees 2,038 2,186 1,798
Amortization of purchased
technology 1,143 828 71
Total cost of revenues 3,575 3,256 2,028
Gross Margin 13,791 16,746 15,336
Operating expenses:
Research and development 10,867 9,591 5,103
Sales and marketing 5,409 4,384 2,871
General and administrative 5,636 6,291 3,927
Restructuring 93 57 69
Total operating expenses 22,005 20,323 11,970
Income (loss) from operations (8,214) (3,577) 3,366
Interest and other income, net 270 1,000 677
Income (loss) before income
taxes (7,944) (2,577) 4,043
Income tax expense 1,399 1,993 1,551
Net income (loss) $(9,343) $(4,570) $2,492
Earnings (loss) per share:
Basic $(0.33) $(0.16) $0.09
Diluted $(0.33) $(0.16) $0.09
Shares used in earnings (loss) per share
calculation:
Basic 28,371 27,936 27,149
Diluted 28,371 27,936 28,961
See notes to unaudited condensed consolidated financial statements
PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended
December September December
31, 2008 30, 2008 31, 2007
Cash flows from operating activities:
Net income (loss) $(9,343) $(4,570) $2,492
Reconciliation to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 1,618 1,305 550
Stock-based
compensation 3,131 4,010 1,022
Other non cash
charges - 79 -
Loss from disposal
of fixed assets - (7) 33
Change in
operating
assets and
liabilities:
Accounts receivable 1,350 (1,245) 1,319
Prepaid royalties and
maintenance (142) (15) 29
Other assets (642) 327 332
Accounts payable 569 681 174
Accrued compensation
and related
liabilities (2,527) 1,094 (933)
Deferred revenue 45 444 197
Income taxes 599 1,306 1,452
Accrued restructuring
charges (256) (28) (1,230)
Other accrued
liabilities (440) 126 530
Net cash provided by
(used in) operating
activities (6,038) 3,507 5,967
Cash flows from
investing
activities:
Purchases of property and
equipment and other
intangible assets (1,304) (1,137) (615)
Acquisition of businesses,
net of cash acquired (204) (11,200) -
Net cash used in
investing activities (1,508) (12,337) (615)
Cash flows from
financing
activities:
Proceeds from stock
purchases under
stock option and stock
purchase
plans 804 803 2,195
Repurchase of common stock (35) (254) -
Principal payments under
capital
lease obligations (2) - -
Net cash provided by
financing activities 767 549 2,195
Effect of changes
in exchange rates 277 (99) 47
Net increase (decrease) in
cash
and cash equivalents (6,502) (8,380) 7,594
Cash and cash equivalents at
beginning of period 37,721 46,101 62,705
Cash and cash equivalents at
end of period $31,219 $37,721 $70,299
See notes to unaudited condensed consolidated financial statements
PHOENIX TECHNOLOGIES LTD.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS) AND
NET EARNINGS (LOSS) PER SHARE
(in thousands, except per share data)
(unaudited)
Three months ended
December September December
31, 2008 30, 2008 31, 2007
GAAP net income (loss) $(9,343) $(4,570) $2,492
Equity-based compensation
expense under SFAS No. 123(R) (1) 3,131 4,010 1,022
Restructuring (2) 93 57 69
Amortization of purchased
intangible assets (3) 1,143 828 71
Non-GAAP net income (loss) $(4,976) $325 $3,654
Non-GAAP earnings (loss) per
share:
Basic $(0.18) $0.01 $0.13
Diluted $(0.18) $0.01 $0.13
Shares used in earnings (loss)
per share calculation:
Basic 28,371 27,936 27,149
Diluted 28,371 29,460 28,961
These adjustments reconcile the Company's GAAP net income (loss) to
the reported non-GAAP net income (loss). The Company believes that
presentation of net income (loss) and net income (loss) per share
excluding equity-based compensation, restructuring costs, and
amortization of purchased intangible assets provides meaningful
supplemental information to investors, as well as management, that is
indicative of the Company's core operating results and facilitates
comparison of operating results across reporting periods as well as
comparison with other companies. The Company uses these non-GAAP
measures when evaluating its financial results as well as for internal
planning and budgeting purposes. Equity-based compensation is
excluded from non-GAAP results because management believes it is
useful to investors to understand how the expenses associated with
SFAS No. 123(R) are reflected in net income (loss). Restructuring
costs are excluded from non-GAAP financial results since they may not
be considered directly related to our ongoing business operations.
Amortization of purchased intangible assets, principally purchased
technology, is excluded from non-GAAP financial results since it
generally cannot be changed by management after an acquisition has
occurred. These non-GAAP measures should not be viewed as a
substitute for the Company's GAAP results, and may be different than
non-GAAP measures used by other companies.
(1) This represents equity-based compensation expense related to the
Company's adoption of SFAS No. 123(R) beginning October 1, 2005.
For the three months ended December 31, 2008, equity-based
compensation was $3.1 million, allocated as follows: $0.2 million
to cost of revenues, $0.9 million to research and development, $0.4
million to sales and marketing and $1.6 million to general and
administrative. For the three months ended September 30, 2008,
equity-based compensation was $4.0 million, allocated as follows:
$0.2 million to cost of revenues, $1.1 million to research and
development, $0.5 million to sales and marketing and $2.2 million to
general and administrative. For the three months ended December 31,
2007, non-cash equity-based compensation was $1.0 million, allocated
as follows: $0.1 million to cost of goods sold, $0.2 million to
research and development, $0.2 million to sales and marketing and
$0.5 million to general and administrative. Management believes
that it is useful to investors to understand how the expenses
associated with the adoption of SFAS No. 123(R) are reflected in net
income.
The quarter ended March 31, 2008 is the first quarter during in which
the Company reported equity-based compensation expense under SFAS No.
123(R) in respect of stock options granted to the Company's four most
senior executives as approved by the Company's stockholders on
January 2, 2008 (the "Performance Options"). Of the $3.1 million of
equity-based compensation for the three months ended December 31,
2008, $1.6 million was due to equity-based compensation expense which
resulted from the grant of the Performance Options. Of the $4.0
million of equity-based compensation for the three months ended
September 30, 2008, $2.0 million was due to equity-based compensation
expense which resulted from the grant of the Performance Options.
There was no such expense recorded during the three months period
ended December 31, 2007.
(2) The Company has incurred restructuring expenses, included in its GAAP
presentation of operating expenses, primarily due to workforce
related charges such as payments for severance and benefits and
estimated costs of exiting and terminating facility lease commitments
related to formal restructuring plans approved by the Board of
Directors in June 2006, September 2006, November 2006 and September
2007. For the three months ended December 31, 2008, costs related
to exiting and terminating facilities leases totaled approximately
$0.1 million due mainly to changes in the projected operating
expenses over the remaining term of the leases. For the three months
ended September 30, 2008, costs related to exiting and terminating
facilities leases totaled approximately $0.1 million due mainly to an
increase in the fiscal year 2003 restructuring reserve for the Irvine
facility by $0.1 million due to projected increased operating
expenses over the remaining term of the lease. For the three months
ended December 31, 2007, severance and benefits totaled $0.1 million
and cost related to exiting and terminating 2 facility lease totaled
$0.1 million. These costs were partly offset when the Company
decreased its fiscal year 2003 restructuring reserve for the Irvine
facility by $0.1 million due to projected income from the signing of
a new sublease over the remaining term of the lease. The Company
believes that these items do not reflect expected future operating
expenses nor does the Company believe that they provide a meaningful
evaluation of current versus past operational performance.
(3) This represents amortization of purchased intangible assets,
principally purchased technology, in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS No. 144") and SFAS No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed" ("SFAS
No. 86"). For the three months ended December 31, 2008, amortization
of purchased intangible assets was $1.1 million allocated to cost of
goods sold, which includes the amortization of the acquired assets
from recent acquisitions. For the three months ended September 30,
2008, amortization of purchased intangible assets was $0.8 million
allocated to cost of goods sold, which includes the amortization of
the acquired assets from recent acquisitions. For the three months
ended December 31, 2007, amortization of purchased intangible assets
was $0.1 million allocated to cost of revenues. Future acquisitions
may cause amortization expenses to be higher than these amounts.
SOURCE Phoenix Technologies Ltd.