SOURCE: Ikanos Communications

Ikanos Communications

October 27, 2009 16:05 ET

Ikanos Communications Reports Results for Third Quarter 2009

Webcast and Slides Accessible on Ikanos Website

FREMONT, CA--(Marketwire - October 27, 2009) - Ikanos Communications, Inc. (NASDAQ: IKAN), a leading provider of advanced broadband semiconductor and software products for the digital home, today reported its financial results for the third quarter ended September 27, 2009.

"During the third quarter, we successfully completed a number of strategic initiatives including the Conexant Broadband Access acquisition, a strategic alliance with ASSIA Inc., and the introduction of Ikanos Velocity™, the industry's lowest power high-performance A/VDSL central office chipset," said Michael Gulett, president and CEO at Ikanos. "These accomplishments strengthen our ability to compete in our core broadband DSL market. In addition, we are pleased with the growth in our communications processor business which accounted for approximately 25 percent of revenue in the most recent quarter."

Financial Highlights:

Revenue for the third quarter of 2009 was $29.3 million compared with revenue of $22.4 million for the second quarter of 2009 and revenue of $24.2 million for the year ago period.

Ikanos reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP) and additionally on a non-GAAP basis. Non-GAAP net income (loss), where applicable, excludes the income statement effects of stock-based compensation, restructuring charges and certain expenses resulting from acquisitions such as transaction-related expenses, amortization of intangible assets, asset impairments, investment impairments, one time severance expenses, fair value adjustment of the acquired inventory and in-process research and development charges. Ikanos has provided these measures because management believes these additional non-GAAP measures are useful to investors for performing financial analysis as these additional measures highlight Ikanos' recurring operating results. Ikanos' management uses these non-GAAP measures internally to evaluate its operating performance and to plan for its future. However, non-GAAP measures are not a substitute for GAAP reporting. For a reconciliation of GAAP versus non-GAAP financial information, please see the attached schedule.

GAAP net loss for the third quarter of 2009 was $15.5 million, or $0.40 per share, on 38.8 million weighted average shares. This compares with a net loss of $6.4 million, or $0.22 per share, on 29.4 million weighted average shares in the second quarter of 2009 and with a net loss of $26.7 million, or $0.93 per share, on 28.6 million weighted average shares in the third quarter of 2008.

Non-GAAP net loss for the third quarter of 2009 was $4.5 million, or $0.12 per share, on 38.8 million weighted average shares. This compares with non-GAAP net loss of $2.8 million, or $0.09 per share, in the second quarter of fiscal 2009, and with a non-GAAP net loss of $2.2 million, or $0.08 per share, in the third quarter of 2008.

Revenue for the nine months ended September 27, 2009 was $72.5 million compared with the $83.7 million reported for the nine months ended September 28, 2008.

GAAP net loss for the nine months ended September 27, 2009 was $28.0 million, or $0.86 per share, on 32.5 million weighted average shares. This compares with a net loss of $35.4 million, or $1.22 per share, on 29.1 million weighted average shares for the year ago period.

Non-GAAP net loss for the nine months ended September 27, 2009 was $10.0 million, or $0.31 per share, compared with non-GAAP net loss of $0.6 million, or $0.02 per share, for the year ago period. Weighted average shares used in computing non-GAAP net loss per share were 32.5 million in 2009 and 29.1 million in 2008.

Recent Highlights:

--  Ikanos completed the acquisition of the Broadband Access product line
    from Conexant Systems, Inc. Under the terms of the agreement, Ikanos
    purchased Conexant's Broadband Access product line for approximately $53
    million in cash, excluding transaction costs, and the assumption of certain
    employee and facility related liabilities. Simultaneously, Ikanos received
    an investment of $42 million, excluding transaction-related expenses, from
    Tallwood Venture Capital.
--  Ikanos introduced its Ikanos Velocity™ family of low-power, full-
    featured VDSL access chipsets. These robust, high-density central office
    (CO) devices provide up to 100 Mbps symmetric bandwidth and operate at sub
    1 Watt per port -- the lowest power consumption of any A/VDSL device on the
    market. And the Ikanos Velocity chipsets are the first CO A/VDSL
    semiconductor devices compliant with European Code of Conduct (CoC) power
    consumption standards. The Velocity chipsets also include proprietary
    Ikanos Quality Video (iQV™) technology, which provides exceptional
    delivery of data-intensive triple play applications, including multi-
    channel high-definition IPTV, high-speed data transmission, video on demand
    (VoD) and voice over Internet Protocol (VoIP).
--  Ikanos announced a strategic relationship with ASSIA Inc., a leading
    provider of Dynamic Spectrum Management (DSM) technology. Under terms of
    the agreement, Ikanos receives a license to ASSIA's essential DSM patents
    and certain know how for the development of vectored DSL products -- also
    known as DSM Level 3 or G. Vector -- capable of delivering speeds of 100
    Mbps and greater over existing copper loops. In addition, the two companies
    will co-market each others' products to the network equipment and service
    provider industries.
--  Ikanos announced that it has joined forces with DSP Group, Inc™ to
    demonstrate a reference design for a multi-service residential gateway with
    fully integrated Digital Enhanced Cordless Telecommunications (DECT)
    capabilities. The DECT/CAT-iq Module from DSP Group, combined with Ikanos'
    Fusiv® Vx180 integrated gateway processor, is designed to enable network
    equipment manufacturers to quickly bring to market a platform that supports
    cordless telephony as a part of a residential gateway offering.
    

Outlook:

--  Revenue is expected to be between $55.0 million and $58.0 million for
    the fourth quarter of 2009.
--  Non-GAAP gross margins are expected to be between 44% and 46% in the
    fourth quarter of 2009. GAAP gross margins in the fourth quarter of 2009
    will be lower than non-GAAP gross margins, as they will include
    amortization of acquisition-related intangibles of approximately $2.0
    million, amortization of the fair-value of acquired inventory of
    approximately $6.0 to $7.5 million and charges related to stock-based
    compensation expense in accordance with FAS 123(R) of approximately $0.1
    million.
--  Non-GAAP operating expenses are expected to be in the range of $25.0
    to $26.0 million in the fourth quarter of 2009. GAAP operating expenses in
    the fourth quarter of 2009 will be higher than non-GAAP operating expenses,
    as they will include amortization of acquisition-related intangibles of
    $1.9 million and charges related to stock-based compensation expense in
    accordance with FAS 123(R) of $1.5 to $2.0 million.
    

Third Quarter Fiscal Year 2009 Conference Call:

Management will review the third quarter 2009 financial results and its expectations for subsequent periods at a conference call on October 27, 2009 at 1:30 p.m. Pacific Time. To listen to the call and view the accompanying presentation, please visit http://www.ikanos.com/investor/webcasts/ and click on the link provided for the webcast or dial 706-902-1343 and enter pass code 36682987. The webcast will be archived and available through November 2, 2009 at http://www.ikanos.com/investor/webcasts/ or by calling 706-645-9291 and enter pass code 36682987.

About Ikanos Communications, Inc.

Ikanos Communications, Inc. (NASDAQ: IKAN) is a leading provider of advanced broadband semiconductor and software products for the digital home. The company's broadband DSL, communications processors and other offerings power access infrastructure and customer premises equipment for many of the world's leading network equipment manufacturers and telecommunications service providers. For more information, visit www.ikanos.com.

© 2009 Ikanos Communications, Inc. All Rights Reserved. Ikanos Communications, Ikanos, the Ikanos logo, the Bandwidth without boundaries tagline, Fusiv, Fx, and FxS, iQV and Ikanos Velocity are among the trademarks or registered trademarks of Ikanos Communications. All other trademarks mentioned herein are properties of their respective holders.

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

This document contains forward-looking statements that are subject to risks and uncertainties concerning Ikanos Communications, including statements regarding the expected revenue for the fourth quarter of 2009, expected gross margins for the fourth quarter of 2009, expected operating expenses for the fourth quarter of 2009, and our ability to compete in the broadband DSL market. Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties. These potential risks and uncertainties include, but are not limited to, the complexity of combining the legacy Ikanos and BBA businesses, effects of the on-going worldwide economic recession on our customers' purchasing plans, our ability to deliver full production releases of our newer products and the acceptance of those products our customers, the continued demand by telecommunications service providers for ADSL and VDSL semiconductor products, the failure of service providers to implement deployment plans on schedule or at all, our continued ability to obtain and deliver production volumes of new and current products and technologies, our ability to generate demand and close transactions for the sale of our products, and unexpected future costs, expenses and financing requirements. In addition, for a more extensive discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see the section entitled "Risk Factors" in Ikanos' most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, as well as other reports that Ikanos files from time to time with the Securities and Exchange Commission. Ikanos is under no obligation to update these forward-looking statements to reflect events or circumstances subsequent to date of this press release.


                        IKANOS COMMUNICATIONS, INC.
         Unaudited Condensed Consolidated Statements of Operations
                  (In thousands, except per share data)

                                 Three Months Ended    Nine Months Ended
                                --------------------  --------------------
                                September  September  September  September
                                27, 2009   28, 2008   27, 2009   28, 2008
                                ---------  ---------  ---------  ---------

Revenue                         $  29,334  $  24,178  $  72,497  $  83,730
Cost of revenue                    19,036     14,212     44,429     48,265
                                ---------  ---------  ---------  ---------
   Gross profit                    10,298      9,966     28,068     35,465
                                ---------  ---------  ---------  ---------
Operating expenses:
 Research and development          13,290     10,282     31,744     33,516
 Selling, general and
  administrative                    9,615      8,142     21,295     20,282
 Asset impairments                  2,460     12,496      2,460     12,496
 Restructuring charges                502          -      1,048          -
                                ---------  ---------  ---------  ---------
   Total operating expenses        25,867     30,920     56,547     66,294
                                ---------  ---------  ---------  ---------
Loss from operations              (15,569)   (20,954)   (28,479)   (30,829)
 Investment impairment                  -     (6,166)         -     (6,166)
 Interest income, net                 146        427        603      1,669
                                ---------  ---------  ---------  ---------
Loss before income taxes          (15,423)   (26,693)   (27,876)   (35,326)
 Provision for (benefit from)
  income taxes                         31        (27)       111         97
                                ---------  ---------  ---------  ---------
Net loss                        $ (15,454) $ (26,666) $ (27,987) $ (35,423)
                                =========  =========  =========  =========

Basic and diluted net loss per
 share                          $   (0.40) $   (0.93) $   (0.86) $   (1.22)
                                =========  =========  =========  =========
Weighted average number of
 shares                            38,802     28,565     32,466     29,139
                                =========  =========  =========  =========



                        IKANOS COMMUNICATIONS, INC.
         Unaudited reconciliation of GAAP to Non-GAAP Condensed
                  Consolidated Statements of Operations
                  (In thousands, except per share data)


                                   Three Months Ended
                                   September 27, 2009
             -------------------------------------------------------------
                 As        Non-GAAP                  Non-GAAP    Non-GAAP
              Reported   Adjustments     Non-GAAP      BBA        Ikanos
             ----------  -----------    ----------  ----------  ----------
Revenue      $   29,334  $        -     $   29,334  $    5,204  $   24,130
Cost of
 revenue         19,036         (60)(a)     16,426       3,184      13,242
                      -      (1,059)(b)          -           -           -
                      -      (1,491)(d)          -           -           -
             ----------  ----------     ----------  ----------  ----------
   Gross
    profit       10,298      (2,610)        12,908       2,020      10,888
             ----------  ----------     ----------  ----------  ----------

Operating
 expenses:
  Research and
   development   13,290        (895)(a)     11,945       4,020       7,925
                      -           -              -           -           -
                      -        (450)(h)          -           -           -
  Selling,
   general
   and admin-
   istrative      9,615        (612)(a)      5,543         946       4,597
                      -        (883)(b)          -           -           -
                      -      (2,577)(h)          -           -           -
  Asset
   impairments    2,460      (2,460)(e)          -           -           -
  Restructuring
   charges          502        (502)(f)          -           -           -
             ----------  ----------     ----------  ----------  ----------
    Total
     operating
     expenses    25,867      (8,379)        17,488       4,966      12,522
             ----------  ----------     ----------  ----------  ----------
Loss from
 operations     (15,569)     10,989         (4,580)     (2,946)     (1,634)
  Investment
   impairment         -           -              -           -           -
  Interest
   income
   and other,
   net              146           -            146           -         146
             ----------  ----------     ----------  ----------  ----------
Loss before
 income
 taxes          (15,423)     10,989         (4,434)     (2,946)     (1,488)
             ----------  ----------     ----------  ----------  ----------
Provision
 for (benefit
 from) income
 taxes               31           -             31           -          31
             ----------  ----------     ----------  ----------  ----------
Net loss     $  (15,454) $   10,989     $   (4,465) $   (2,946) $   (1,519)
             ==========  ==========     ==========  ==========  ==========

Net loss per
 share:
   Basic and
    diluted  $    (0.40)                $    (0.12)
Weighted
 average
 outstanding
 shares:
   Basic and
    diluted      38,802                     38,802



                       Three Months Ended
                       September 28, 2008
             -------------------------------------
                 As        Non-GAAP
              Reported   Adjustments     Non-GAAP
             ----------  -----------    ----------
Revenue      $   24,178  $        -     $   24,178
Cost of
 revenue         14,212           7 (a)     13,090
                      -        (762)(b)          -
                      -        (367)(d)          -
             ----------  ----------     ----------
   Gross
    profit        9,966      (1,122)        11,088
             ----------  ----------     ----------

Operating
 expenses:
  Research and
   development   10,282      (1,185)(a)      8,870
                      -        (125)(b)          -
                      -        (102)(c)          -
  Selling,
   general
   and admin-
   istrative      8,142      (2,035)(a)      4,864
                      -        (611)(b)          -
                      -        (632)(c)          -
  Asset
   impairments   12,496     (12,496)(e)          -
  Restructuring
   charges            -           -              -
             ----------  ----------     ----------
    Total
     operating
     expenses    30,920     (17,186)        13,734
             ----------  ----------     ----------
Loss from
 operations     (20,954)     18,308         (2,646)
  Investment
   impairment    (6,166)      6,166 (g)          -
  Interest
   income
   and other,
   net              427           -            427
             ----------  ----------     ----------
Loss before
 income
 taxes          (26,693)     24,474         (2,219)
             ----------  ----------     ----------
Provision
 for (benefit
 from) income
 taxes              (27)          -            (27)
             ----------  ----------     ----------
Net loss     $  (26,666) $   24,474     $   (2,192)
             ==========  ==========     ==========

Net loss per
 share:
   Basic and
    diluted  $    (0.93)                $    (0.08)
Weighted
 average
 outstanding
 shares:
   Basic and
    diluted      28,565                     28,565


Notes:                       Three Months Ended
                          September      September
                          27, 2009       28, 2008
                         ----------     ----------
(a) Stock-based
    compensation         $    1,567     $    3,213
(b) Amortization of
    acquired intangible
    assets                    1,942          1,498
(c) Severance                     -            734
(d) Fair-value adjustment
    of acquired inventory     1,491            367
(e) Impairments of assets
    and in-process R&D        2,460         12,496
(f) Restructuring charges       502              -
(g) Investment impairment         -          6,166
(h) Transaction-related
    expenses                  3,027              -
                         ----------     ----------
    Total non-GAAP
     adjustments         $   10,989     $   24,474
                         ==========     ==========




                        IKANOS COMMUNICATIONS, INC.
          Unaudited reconciliation of GAAP to Non-GAAP Condensed
                   Consolidated Statements of Operations
                   (In thousands, except per share data)


                                                Nine Months Ended
                                                September 27, 2009
                                     -------------------------------------
                                         As        Non-GAAP
                                      Reported   Adjustments     Non-GAAP
                                     ----------  -----------    ----------
Revenue                              $   72,497  $        -     $   72,497
Cost of revenue                          44,429        (209)(a)     40,257
                                              -      (2,472)(b)          -
                                              -      (1,491)(d)          -
                                     ----------  ----------     ----------
     Gross profit                        28,068      (4,172)        32,240
                                     ----------  ----------     ----------

Operating expenses:
  Research and development               31,744      (2,314)(a)     28,980
                                              -        (450)(h)          -
                                              -           -              -
                                              -           -              -
  Selling, general and
   administrative                        21,295      (1,897)(a)     13,783
                                              -      (1,626)(b)          -
                                              -      (3,989)(h)          -
  Asset impairments                       2,460      (2,460)(f)          -
  Restructuring charges                   1,048      (1,048)(e)          -
                                     ----------  ----------     ----------
     Total operating expenses            56,547     (13,784)        42,763
                                     ----------  ----------     ----------
Loss from operations                    (28,479)     17,956        (10,523)
  Investment impairment                       -           -              -
  Interest income and other, net            603           -            603
                                     ----------  ----------     ----------
Loss before income taxes                (27,876)     17,956         (9,920)
                                     ----------  ----------     ----------
Provision for income taxes                  111           -            111
                                     ----------  ----------     ----------
Net loss                             $  (27,987) $   17,956     $  (10,031)
                                     ==========  ==========     ==========

Net loss per share:
     Basic and diluted               $    (0.86)                $    (0.31)
Weighted average outstanding shares:
     Basic and diluted                   32,466                     32,466



                                                Nine Months Ended
                                                September 28, 2008
                                     -------------------------------------
                                         As        Non-GAAP
                                      Reported   Adjustments     Non-GAAP
                                     ----------  -----------    ----------
Revenue                              $   83,730  $        -     $   83,730
Cost of revenue                          48,265        (230)(a)     43,828
                                              -      (2,744)(b)          -
                                              -      (1,463)(d)          -
                                     ----------  ----------     ----------
     Gross profit                        35,465      (4,437)        39,902
                                     ----------  ----------     ----------

Operating expenses:
  Research and development               33,516      (4,227)(a)     28,502
                                              -        (375)(b)          -
                                              -        (102)(c)          -
                                              -        (310)(f)          -
  Selling, general and
   administrative                        20,282      (4,189)(a)     13,562
                                              -      (1,899)(b)          -
                                              -        (632)(c)          -
  Asset impairments                      12,496     (12,496)(f)          -
  Restructuring charges                       -           -              -
                                     ----------  ----------     ----------
     Total operating expenses            66,294     (24,230)        42,064
                                     ----------  ----------     ----------
Loss from operations                    (30,829)     28,667         (2,162)
  Investment impairment                  (6,166)      6,166 (g)          -
  Interest income and other, net          1,669           -          1,669
                                     ----------  ----------     ----------
Loss before income taxes                (35,326)     34,833           (493)
                                     ----------  ----------     ----------
Provision for income taxes                   97           -             97
                                     ----------  ----------     ----------
Net loss                             $  (35,423) $   34,833     $     (590)
                                     ==========  ==========     ==========

Net loss per share:
     Basic and diluted               $    (1.22)                $    (0.02)
Weighted average outstanding shares:
     Basic and diluted                   29,139                     29,139


Notes:                                                Nine Months Ended
                                                  September      September
                                                  27, 2009       28, 2008
                                                 ----------     ----------
(a) Stock-based compensation                     $    4,420     $    8,646
(b) Amortization of acquired intangible assets        4,098          5,018
(c) Severance                                             -            734
(d) Fair-value adjustment of acquired inventory       1,491          1,463
(e) Restructuring charges                             1,048              -
(f) Impairments of assets and in-process R&D          2,460         12,806
(g) Investment impairment                                 -          6,166
(h) Transaction-related expenses                      3,989              -
                                                 ----------     ----------
    Total non-GAAP adjustments                   $   17,506     $   34,833
                                                 ==========     ==========



                        IKANOS COMMUNICATIONS, INC.
              Unaudited Condensed Consolidated Balance Sheets
                              (In thousands)

                                                 September 27, December 28,
                                                     2009          2008
                                                 ------------  ------------
                     Assets
Current assets:
  Cash, cash equivalents and short-term
   investments                                   $     37,833  $     63,339
  Accounts receivable, net                             17,888        12,360
  Inventory                                            34,532        12,489
  Prepaid expenses and other current assets             2,555         1,744
                                                 ------------  ------------
    Total current assets                               92,808        89,932
Long-term investments                                   1,034         1,034
Property and equipment, net                             8,033         9,597
Intangible assets, net                                 29,468         6,290
Goodwill                                                8,633             -
Other assets                                            1,145           580
                                                 ------------  ------------
                                                 $    141,121  $    107,433
                                                 ============  ============


       Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                               $     17,521  $      9,237
  Accrued liabilities                                  15,594         8,680
                                                 ------------  ------------
    Total current liabilities                          33,115        17,917
Other liabilities                                       3,448             -
                                                 ------------  ------------
      Total liabilities                                36,563        17,917
Stockholders' equity                                  104,558        89,516
                                                 ------------  ------------
                                                 $    141,121  $    107,433
                                                 ============  ============

Contact Information

  • Contacts

    Investor Relations
    Bonnie Mott
    Ikanos Communications
    510-438-5360
    Email Contact

    Media Relations
    Margo Westfall
    Ikanos Communications
    510-438-6276
    Email Contact