Phoenix Technologies Ltd. Reports Second Quarter Fiscal 2009 Financial Results
– Total revenues of
– GAAP net loss of (
– Non-GAAP net loss, adjusted to exclude charges for amortization of intangible assets, restructuring charges, stock-based compensation, and impairment of goodwill and intangible assets, of (
(Logo: http://www.newscom.com/cgi-bin/prnh/20070410/SFTU048LOGO)
“Our second quarter performance reflects the substantial impact of the weakened global economy on the PC industry,” said President and CEO
In the course of preparing its financial statements for the quarter ended
Mr. Hobbs concluded, “Despite the current weakness in the PC industry, we remain committed to investing in our new products and services as we pursue a market opportunity that is several times greater than that of our core systems software products. Meanwhile, cost reduction initiatives we have undertaken both during and subsequent to the close of the quarter provide us with a right-sized operating platform from which to execute on our growth strategy. We are confident that there is broad industry and consumer interest in our new products and expect to gain further momentum as we achieve key milestones in the current quarter, including the first OEM deployments of both our FailSafe(TM) and HyperSpace(TM) products. We are also seeing some encouraging early signs of a return to more normal production levels across the PC supply chain.”
Second Quarter Fiscal 2009 Financial Summary
Total revenues for the second quarter of fiscal 2009 ended
Conference Call
The Company will conduct its regularly scheduled financial announcement conference call on
About Phoenix Technologies
Phoenix Technologies Ltd. (Nasdaq: PTEC), the leader in PC 3.0(TM) products, services and embedded technologies, pioneers open standards and delivers innovative solutions that enable the PC industry’s top system builders and specifiers to differentiate their systems, reduce time-to-market and increase their revenues. The Company’s flagship products and services — SecureCore, Embedded BIOS, Phoenix FailSafe, HyperSpace and eSupport — are revolutionizing the PC user experience by delivering unprecedented performance, security, reliability, continuity, and ease-of-use. The Company established industry leadership and created the PC clone industry with its original BIOS product in 1983.
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 deployments of our FailSafe and HyperSpace products, the level of industry and consumer interest in our new products and market trends. These statements involve risk and uncertainties, including: demand for our products and services in adverse economic conditions; our dependence on key customers; our ability to successfully enhance existing products and develop and market new products and technologies; our ability to achieve and maintain profitability and positive cash flow from operations; our ability to meet our capital requirements in the future; 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; our ability to generate additional capital on terms acceptable to us; 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; the volatility of our stock price; 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; fluctuations in our operating results; the effects of any software viruses or other breaches of our network security; 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; internet infrastructure; risk associated with usage of open source software; our dependence on third party service providers; any material weakness in our internal controls over financial reporting; changes in financial accounting standards and our cost of compliance; business disruptions due to acts of war, 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
Sanjay M. Hurry
Tel. +1 212 481 2050
phoenix@thepiacentegroup.com
PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 31, September 30,
2009 2008
---- ----
Assets
Current assets:
Cash and cash equivalents $22,619 $37,721
Accounts receivable, net of allowances 7,594 6,246
Other assets - current 8,399 8,190
----- -----
Total current assets 38,612 52,157
Property and equipment, net 5,069 4,125
Purchased technology and other intangible
assets, net 8,427 22,323
Goodwill 21,926 54,943
Other assets - noncurrent 2,948 2,994
----- -----
Total assets $76,982 $136,542
======= ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $2,049 $2,855
Accrued compensation and related liabilities 3,938 6,050
Deferred revenue 16,192 15,010
Income taxes payable - current 3,741 4,099
Accrued restructuring charges - current 440 658
Other liabilities - current 9,802 10,318
----- ------
Total current liabilities 36,162 38,990
Accrued restructuring charges - noncurrent 46 8
Income taxes payable - noncurrent 14,391 13,629
Other liabilities - noncurrent 2,557 2,508
----- -----
Total liabilities 53,156 55,135
Stockholders' equity:
Preferred stock - -
Common stock 30 29
Additional paid-in capital 241,918 235,562
Accumulated deficit (126,278) (61,786)
Accumulated other comprehensive loss 175 (466)
Less: Cost of treasury stock (92,019) (91,932)
------- -------
Total stockholders' equity 23,826 81,407
------ ------
Total liabilities and stockholders'
equity $76,982 $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 Six months
ended March 31, ended March 31,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
License fees $12,628 $14,818 $27,112 $30,227
Subscription fees 743 - 1,191 -
Service fees 2,447 2,242 4,881 4,197
----- ----- ----- -----
Total revenues 15,818 17,060 33,184 34,424
Cost of revenues:
License fees 198 83 286 242
Subscription fees 446 - 752 -
Service fees 1,992 1,719 4,030 3,517
Amortization of purchased
intangible assets 910 - 2,053 71
Impairment of purchased
intangible assets 11,943 - 11,943 -
------ --- ------ ---
Total cost of revenues 15,489 1,802 19,064 3,830
Gross margin 329 15,258 14,120 30,594
Operating expenses:
Research and development 10,591 6,569 21,458 11,672
Sales and marketing 5,740 2,769 11,149 5,640
General and administrative 4,998 5,586 10,634 9,513
Restructuring 1,049 44 1,142 113
Impairment of goodwill 33,213 - 33,213 -
------ --- ------ ---
Total operating expenses 55,591 14,968 77,596 26,938
------ ------ ------ ------
Income (loss) from operations (55,262) 290 (63,476) 3,656
Interest and other income
(expenses), net 335 (403) 605 274
--- ---- --- ---
Income (loss) before income taxes (54,927) (113) (62,871) 3,930
Income tax expense 221 1,252 1,620 2,803
--- ----- ----- -----
Net income (loss) $(55,148) $(1,365) $(64,491) $1,127
======== ======= ======== ======
.
Earnings (loss) per share:
--------------------------
Basic $(1.93) $(0.05) $(2.27) $0.04
Diluted $(1.93) $(0.05) $(2.27) $0.04
Shares used in earnings (loss)
per share calculation:
------------------------------
Basic 28,560 27,431 28,465 27,291
Diluted 28,560 27,431 28,465 29,114
See notes to unaudited condensed consolidated financial statements
PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended
------------------
March December March Six months
31, 31, 31, ended March 31,
----- -------- ----- ----------------
2009 2008 2008 2009 2008
---- ---- ---- ---- ----
Cash flows from operating
activities:
Net income (loss) $(55,148) $(9,343) $(1,365) $(64,491) $1,127
Reconciliation to
net cash provided
by (used in) operating
activities:
Depreciation and
amortization 1,417 1,618 501 3,035 1,051
Stock-based
compensation 2,423 3,131 3,665 5,554 4,687
Loss from disposal of
fixed assets (4) - - (4) 33
Impairment of
purchased intangible
assets 11,943 - - 11,943 -
Impairment of
goodwill 33,213 - - 33,213 -
Change in operating
assets and
liabilities:
Accounts receivable (2,588) 1,350 942 (1,238) 2,261
Prepaid royalties and
maintenance 17 (142) 3 (125) 32
Other assets 621 (642) (882) (21) (550)
Accounts payable (1,290) 568 (177) (722) (3)
Accrued compensation
and related
liabilities 637 (2,527) 645 (1,890) (288)
Deferred revenue 1,261 45 2,267 1,306 2,464
Income taxes (152) 599 1,755 447 3,207
Accrued restructuring
charges 95 (256) (246) (161) (1,476)
Other accrued
liabilities (447) (441) 348 (888) 878
---- ---- --- ---- ---
Net cash provided by
(used in) operating
activities (8,002) (6,040) 7,456 (14,042) 13,423
------ ------ ----- ------- ------
Cash flows from investing
activities:
Purchases of property
and equipment and
other intangible assets (155) (1,304) (316) (1,459) (931)
Acquisition of businesses,
net of cash acquired - (204) - (204) -
--- ---- --- ---- ---
Net cash used in
investing activities (155) (1,508) (316) (1,663) (931)
---- ------ ---- ------ ----
Cash flows from financing
activities:
Proceeds from stock
purchases under stock
option and stock
purchase plans - 804 1,355 804 3,550
Repurchase of common stock (52) (35) - (87) -
--- --- --- --- -----
Net cash provided by
(used in) financing
activities (52) 769 1,355 717 3,550
--- --- ----- --- -----
Effect of changes in
exchange rates (391) 277 191 (114) 238
---- --- --- ---- ---
Net increase (decrease)
in cash and cash
equivalents (8,600) (6,502) 8,686 (15,102) 16,280
Cash and cash
equivalents at
beginning of period 31,219 37,721 70,299 37,721 62,705
------ ------ ------ ------ ------
Cash and cash equivalents
at end of period $22,619 $31,219 $78,985 $22,619 $78,985
======= ======= ======= ======= =======
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
------------------ Six months
March December March ended
31, 31, 31, March 31,
----- -------- ----- ----------
2009 2008 2008 2009 2008
---- ---- ---- ---- ----
GAAP net income (loss) $(55,148) $(9,343) $(1,365) $(64,491) $1,127
Equity-based
compensation expense
under SFAS
No. 123(R) (1) 2,423 3,131 3,665 5,554 4,687
Restructuring (2) 1,049 93 44 1,142 113
Amortization of
purchased
intangible assets (3) 910 1,143 - 2,053 71
Impairment of
purchased
intangible assets (4) 11,943 - - 11,943 -
Impairment of
goodwill (4) 33,213 - - 33,213 -
------- --- --- -------- ---
Non-GAAP net income
(loss) $(5,610) $(4,976) $2,344 $(10,586) $5,998
======= ======= ====== ======== ======
Non-GAAP earnings
(loss) per share:
------------------
Basic $(0.20) $(0.18) $0.09 $(0.37) $0.22
Diluted $(0.20) $(0.18) $0.08 $(0.37) $0.21
Shares used in
earnings (loss) per
share calculation:
--------------------
Basic 28,560 28,371 27,431 28,465 27,291
Diluted 28,560 28,371 29,514 28,465 29,114
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,
amortization of purchased intangible assets and impairment of
purchased intangible assets and of goodwill 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, are excluded from non-GAAP financial results since it
generally cannot be changed by management after an acquisition has
occurred. Impairment of purchased intangible assets and goodwill are
excluded from non-GAAP financial results since management believes
that these charges are not directly related to the underlying
performance of the Company's core business operations and eliminating
these will assist investors to compare current versus past operational
performance. 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 March 31, 2009, equity-based compensation was
$2.4 million, allocated as follows: $0.1 million to cost of revenues,
$0.7 million to research and development, $0.3 million to sales and
marketing and $1.3 million to general and administrative. 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 March 31, 2008, equity-based compensation was $3.7
million, allocated as follows: $0.1 million to cost of goods sold,
$1.0 million to research and development, $0.4 million to sales and
marketing and $2.2 million to general and administrative. For the six
months ended March 31, 2009, equity-based compensation was $5.6
million, allocated as follows: $0.3 million to cost of goods sold,
$1.6 million to research and development, $0.8 million to sales and
marketing and $2.9 million to general and administrative. For the
six months ended March 31, 2008, equity-based compensation was $4.7
million, allocated as follows: $0.2 million to cost of goods sold,
$1.1 million to research and development, $0.6 million to sales and
marketing and $2.8 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 $2.4 million of equity-
based compensation for the three months ended March 31, 2009, $1.0
million was due to equity-based compensation expense which resulted
from the grant of 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 $3.7
million of equity-based compensation for the three months ended March
31, 2008, $2.0 million was due to equity-based compensation expense
which resulted from the grant of the Performance Options. Of the
$5.6 million of equity-based compensation for the six months ended
March 31, 2009, $2.5 million was due to equity-based compensation
expense which resulted from the grant of the Performance Options. Of
the $4.7 million of equity-based compensation for the three months
ended March 31, 2008, $2.0 million was due to equity-based
compensation expense which resulted from the grant of the Performance
Options.
(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/management in June 2006, September 2006, November 2006,
September 2007, February 2009 and March 2009. For the three months
ended March 31, 2009, restructuring costs totaled $1.0 million, which
relates mainly to the severance and other employee related costs
incurred in relation to the two restructuring plans announced during
the quarter ended March 31, 2009. As part of these restructuring
activities, the Company reduced its global workforce by 96 employees
and closed its facility in Tel Aviv, Israel. 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 March 31, 2008, cost related
to exiting and terminating 2 facility leases totaled approximately
$47,000 and severance and benefits decreased for over accrued employer
taxes of approximately $3,000. For the six months ended March 31,
2009, restructuring costs totaled $1.1 million, out of which $1.0
million relates to the severance and other employee related cost
incurred in relation to the two restructuring plans announced during
the quarter ended March 31, 2009 and $0.1 million relates to
facilities and lease costs in respect of the earlier restructuring
plans. For the six months ended March 31, 2008, restructuring costs
were $0.1 million. The severance and benefits costs totaled
approximately $80,000. The facilities lease costs totaled
approximately $30,000. 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 March 31, 2009, amortization of
purchased intangible assets was $0.9 million allocated to cost of
goods sold, which primarily include the amortization of the acquired
assets from recent acquisitions. For the three months ended December
31, 2008, amortization of purchased intangible assets was $1.1 million
allocated to cost of goods sold, which primarily includes the
amortization of the acquired assets from recent acquisitions. For the
three months ended March 31, 2008, there was no amortization of
purchased intangible assets. For the six months ended March 31, 2009,
amortization of purchased intangible assets was $2.1 million,
allocated to cost of goods sold, which primarily include the
amortization of the acquired assets from recent acquisitions. For the
six months ended March 31, 2008, amortization of purchased intangible
assets was $0.1 million allocated to cost of goods sold. Future
acquisitions may cause amortization expenses to be higher than these
amounts.
(4) This represents impairment of goodwill and purchased intangible assets
in accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets" ("SFAS No. 142"), 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 and six
months ended March 31, 2009, impairment of purchased intangible assets
was $11.9 million and impairment of goodwill was $33.2 million, which
include the impairments of the acquired assets from recent
acquisitions. There were no impairment charges recorded on purchased
intangible assets or goodwill in the other periods presented. SFAS
142 and SFAS 144 adjustments typically occur when the financial
performance of the business utilizing the affected assets falls below
certain thresholds or certain assets are designated as held for sale.
Accordingly, SFAS 142 and SFAS 144 related asset impairment are
generally unpredictable and several factors could result in further
impairment of the remaining goodwill and other intangible assets in
the future periods.
SOURCE Phoenix Technologies Ltd.