-- WiMAX
-- Sales of WiMAX Forum Certified™ and non-certified products to more
than 60 customers, including our 100th such customer.
-- Significant deployment by Deutsche Breitband Dienste began in
Germany;, and Pipex Wireless announced a deployment in England.
-- Successfully conducted a mobile plugfest, demonstrating Airspan's
802.16e equipment to be interoperable with other vendors' equipment.
-- Introduced several new base station models -- the mobility-capable
HiperMAX, and the low-cost MicroMAX SOC.
-- Successfully completed network optimization with Yozan in Japan,
confirming network availability in excess of 99%. The Yozan supply
contract value was confirmed at $28 million.
-- WipLL
-- Second highest ever quarterly revenue for WipLL, following a record
second quarter this year. Third quarter 2006 WipLL revenue was 25%
higher than the comparable period of 2005.
-- Balance Sheet
-- Ended the quarter with cash balances (including restricted cash and
short term investments) of $40.5 million, which included
approximately $29 million raised from the sale of preferred stock to
Oak Investment Partners.
-- Obtained a $10 million secured line of credit from Silicon Valley
Bank.
-- Management Team and Board of Directors
-- Industry veteran Alastair Westgarth appointed Chief Technical
Officer.
-- Outside Directors Julianne Biagini and Bandel Carano added to the
Board of Directors.
Financial Results
Revenue totaled $27.3 million for the quarter ended October 1, 2006,
representing an 11% decrease from the $30.5 million reported for the
quarter ended October 2, 2005. The decrease was attributable primarily to
lower sales of our legacy Proximity and AS4000/4020 products, offset in
part by increased sales of WiMAX, WipLL and AS.NET product lines. The
decline in revenue compared to the second quarter of 2006 was due mainly to
lower revenue recorded under the Yozan supply agreement in the third
quarter. 2006 year-to-date revenue grew by 32% over the first three
quarters of 2005 due to increased WiMAX and WipLL sales, offset by lower
Proximity revenues. The year-to-date revenue of $68.3 million associated
with our product lines other than Proximity and AS.NET represents 120%
growth compared to revenue of $31 million for such product lines in the
same period of 2005.
We recorded a gross profit of $7.3 million in the quarter, and our gross
profit as a percentage of revenue ("gross profit margin") was 27%. This
compares to a reported gross profit of $9.1 million and a gross profit
margin of 30% for the third quarter of 2005, and a gross profit of $8.7
million and a gross profit margin of 19% for the second quarter of 2006.
Our gross margins in the third quarter 2006 were relatively lower than the
margins generated in the same period of 2005 due primarily to a change in
mix of products sold and increased new product introduction costs.
Third quarter 2006 operating expenses of $16.3 million were $4.2 million
higher than the third quarter of 2005, but $0.7 million lower than the
prior quarter's operating expenses. The third quarter 2006 included a $1.5
million restructuring charge. In July 2006, we decreased our headcount and
our monthly operating expenses by initiating a restructuring and other
cost-containment programs. Excluding the $1.5 million restructuring charge
in the third quarter, operating expenses were reduced 13% on a non-GAAP
basis from the prior quarter's operating expenses. There were no
restructuring charges in the third quarter of 2005.
Net loss for the third quarter of 2006 was $(18.3) million, or $(0.46) per
share. This included a charge of $9.2 million ($0.23 per share) for the
deemed dividend on the issuance of preferred stock and other related costs,
and compared to a net loss of $2.1 million ($(0.05) per share) in the third
quarter of 2005.
In the third quarter 2006, we took two important steps to strengthen our
cash position. In August we closed a two-year secured revolving credit line
of up to $10 million with Silicon Valley Bank. In September, we issued
200,690 shares of Series B Preferred Stock to Oak Investment Partners in
exchange for approximately $29 million of cash and Oak's transfer of all
73,000 shares of Series A Preferred Stock held by Oak prior to the close of
the transaction. We ended the third quarter with a cash balance, including
restricted cash, of $40.5 million, a $23.1 million increase over the
balance at the end of the prior quarter.
"We are pleased to report that our 2006 revenue year-to-date is up almost a
third versus the first three quarters of 2005, and is already higher than
the full year revenue for 2004," said Eric Stonestrom, Airspan's president
and chief executive officer. "We are making great strides in the
development and deployment of our WiMAX products, selling this quarter to
our 100th WiMAX customer. The deployments announced in England and Germany,
together with the successful completion of Yozan's Tokyo network
optimization, demonstrate the acceptance of our WiMAX products in major
developed economies. We continue to lead the field in WiMAX product
certification and interoperability testing. Our restructuring activities
began in July 2006 and they are already producing cost savings. Headcount
and operating costs are down and our new Operations leadership team is in
place."
"Year-to-date revenues are well up on 2005, although the cost of new
product introduction has affected our gross profit margins," said Peter
Aronstam, chief financial officer. "Specific plans for improving margin
levels are being implemented. We are also pleased with our progress in the
quarter of reducing operating expenses from levels incurred earlier in
2006. The additional cash from Oak and the availability of the new bank
line of credit will allow us to focus on the introduction of new WiMAX
products to the market in the months ahead."
Outlook
Mr. Stonestrom also stated that the Company expects revenues for the full
year to be in the range of $125 to $130 million. He said: "This would give
us double digit revenue growth for the full year, driven by more than 80%
revenue growth year-over-year of our WiMAX and WipLL products.
Investor Conference
The Company has scheduled an investor conference call for 5 p.m. EST today.
The dial-in numbers for the live conference call are as follows: US
toll-free number is (888) 443-9987; the international access dial-in number
is +1-706-634-0598. Please reference the Airspan Networks Conference ID #
6576166.
Investors may register for the live web cast of the conference call under
the 'financial calendar' tab of the Investor Relations section of the
Airspan Web site at http://www.visualwebcaster.com/event.asp?id=36522.
For those who cannot listen to the live broadcast, an audio replay of the
call will be available under the 'audio archives' section of the Investor
Relations section of the Airspan Web site. The US toll-free number for the
replay is (800) 642-1687; international access number for the replay is
+1-706-645-9291. Please use access code 6576166.
Use of Non-GAAP Measures
To supplement our financial results presented on a GAAP basis, we use
non-GAAP measures indicated in the press release, which exclude certain
accounting entries related to operating expenses, which we believe may be
helpful in understanding our financial performance. Our non-GAAP financial
measures are not meant to be considered in isolation or as a substitute for
comparable GAAP measures, and should be read only in conjunction with our
consolidated financial statements prepared in accordance with GAAP. Our
management regularly uses supplemental non-GAAP financial measures
internally to understand, manage and evaluate our business and to make
operating decisions. These non-GAAP measures are among the many factors
management uses in planning for and forecasting future periods. Our
non-GAAP financial measures reflect adjustments based on the following
item:
-- Exclusion of certain items of Operating expenses: Accounting rules
require us to account for all operating expenses we incur in the reported
period, including any costs we may incur as part of a restructuring of the
business. In presenting our operating expenses, we have presented
operating expenses both with and without the requisite accounting for
restructuring costs. We believe this is useful because the exclusion of
restructuring costs for a particular period may help investors better
understand the effect that the restructuring has had on operating expenses
when compared to operating expenses for prior periods, and also what effect
the restructuring may have on operating expenses in future periods.
In addition, in this press release we have also presented revenue both with
and excluding revenue generated from certain product lines when making
comparisons to prior periods. Accounting rules require us to account for
revenues from all products and services sold and delivered when reporting
revenue in any accounting period. Because we sell a mix of products that
are at various stages in their perceived product cycles, we believe it is
useful for us and investors to be able to determine and compare with prior
periods the rates of growth in revenues of new products and declines in
revenues of mature product lines. The presentation in this press release
is intended to reflect in particular the growth of the newer broadband
wide-area wireless access products. We believe this is useful to investors
as a measure of the ongoing performance of our business because we have
historically experienced improving growth of new products in the periods
closely following their introduction, and declines in revenues of
older-generation products.
About Airspan Networks Inc.
Airspan Networks provides fixed and wireless voice and data systems and
solutions, including Voice Over IP (VoIP). Its wireless products serve
operators around the world in both licensed and unlicensed frequency bands
between 700 MHz and 6 GHz, including both PCS and 3.5GHz international
bands. Airspan has a strong wireless product roadmap that includes products
meeting 802.11 a/b/g Wi-Fi standards, and WiMAX Forum CertifiedTM equipment
that includes software upgradeability to Mobile WiMAX (the 802.16e-2005
standard). Airspan is on the Board and is a founder member of the WiMAX
Forum and a member of the Wi-Fi Alliance. The Company has deployments in
more than 100 countries with more than 400 operators, 100 of which use
Airspan's WiMAX Forum CertifiedTM and non-certified products. Airspan's
wireless systems are based on radio technology that delivers excellent area
coverage, high security and resistance to fading. These systems can be
deployed rapidly and cost effectively, providing an attractive alternative
to traditional wired communications networks. Airspan's AS.TONE VoIP system
is a carrier class, turnkey solution that provides carriers with Class 4,
Class 5 and IP-Centrex solutions and has a Softswitch and Gateways
supporting SIP/H323 and SIP. AS.Tone's design provides customers, carriers,
next-generation telcos, cellular providers and ITSP with a wide range of
solutions with the best price/performance system for IP telephony. Airspan
also offers radio planning, network installation, integration, training and
support services to facilitate the deployment and operation of its systems.
Airspan is headquartered in Boca Raton, Florida with its main operations
center in Uxbridge, United Kingdom.
More information on Airspan can be found at http://www.airspan.com
This press release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All statements, other than statements of
historical facts, including statements regarding our strategy, future
operations, financial position, future revenues, projected costs,
prospects, plans and objectives of management, may be deemed to be
forward-looking statements. The words "targets," "anticipates,"
"believes," "estimates," "expects," "intends," "may," "plans," "projects,"
"will," "would" and similar expressions or negative variations thereof are
intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. We may not
actually achieve the plans, intentions or expectations disclosed in our
forward-looking statements and you should not place undue reliance on our
forward-looking statements. There are a number of important factors that
could cause actual results or events to differ materially from the plans,
intentions and expectations disclosed in the forward-looking statements we
make. Investors and others are therefore cautioned that a variety of
factors, including certain risks, may affect our business and cause actual
results to differ materially from those set forth in the forward-looking
statements. These risk factors include, without limitation, (i) a slowdown
of expenditures by communication service providers; (ii) increased
competition from alternative communication systems; (iii) the failure of
our existing or prospective customers to purchase products as projected;
(iv) our inability to successfully implement cost reduction or containment
programs; (v) the potential loss of Axtel and Yozan as our largest
customers; (vi) our potential inability to locate and secure additional
sources of capital at the time and in the amount needed; (vii) the
possibility that Yozan will materially delay or cancel future equipment
orders; (viii) disruption to our operations in Israel, including the
absence of employees due to required military service caused by political
and military tensions in Israel and the Middle East. The Company is subject
to the risks and uncertainties described in its filings with the Securities
and Exchange Commission, including its Annual Report on Form 10-K for the
year ended December 31, 2005 and its Form 10-Qs for the quarters ended
April 2, 2006, July 2, 2006 and October 1, 2006. You should read those
factors as being applicable to all related forward-looking statements
wherever they appear in this press release. We do not assume any
obligation to update any forward-looking statements.
Airspan Networks Inc.
Consolidated Balance Sheets
(in thousands)
December 31, October 1,
2005 2006
------------- ------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 44,140 $ 38,178
Restricted cash 2,290 1,280
Short term investments 6,020 1,008
Accounts receivable 24,348 24,422
Unbilled accounts receivable 273 2,018
Inventory 16,850 23,365
Prepaid expenses and other current
assets 3,722 6,314
------------- ------------
Total Current Assets 97,643 96,585
Property, plant and equipment, net 5,268 6,044
Goodwill 10,231 10,231
Intangible assets, net 3,865 3,040
Other non-current assets 3,445 3,460
------------- ------------
Total Assets $ 120,452 $ 119,360
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 24,678 $ 23,975
Accrued taxes 1,156 760
Deferred revenue 1,514 2,720
Customer advances 13,935 4,576
Other accrued expenses 13,113 14,610
Current portion long term debt 96 -
------------- ------------
Total Current Liabilities 54,492 46,641
------------- ------------
Non Current Liabilities
Long term debt 1,296 1,493
Accrued interest on long term debt 53 133
------------- ------------
Total Current Liabilities 1,349 1,626
------------- ------------
Stockholders’ Equity
Preferred stock - -
Common stock 12 12
Note receivable - stockholder (87) (87)
Additional paid in capital 267,426 308,041
Accumulated other comprehensive income (130) -
Accumulated deficit (202,610) (236,873)
------------- ------------
Total Stockholders’ Equity 64,611 71,093
------------- ------------
------------- ------------
Total Liabilities and Stockholders’
Equity $ 120,452 $ 119,360
============= =============
Airspan Networks Inc.
Consolidated Statements of Income
(in thousands except for share and per share data)
Quarter End Year-to-Date
---------------------- ----------------------
October 2, October 1, October 2, October 1,
2005 2006 2005 2006
---------- ---------- ---------- ----------
(unaudited) (unaudited)
Revenue $ 30,545 $ 27,303 $ 73,072 $ 96,538
Cost of revenue (21,462) (20,047) (51,711) (74,119)
---------- ---------- ---------- ----------
Gross profit 9,083 7,256 21,361 22,419
---------- ---------- ---------- ----------
Operating expenses:
Research and development 5,398 6,065 15,058 18,850
Sales and marketing 2,858 4,051 8,105 13,582
Bad debt provision 307 297 802 1,548
General and administrative 3,223 4,072 9,046 12,154
Amortization of intangibles 337 276 593 826
Restructuring provision - 1,528 1,150 1,528
---------- ---------- ---------- ----------
Total operating expenses 12,123 16,289 34,754 48,488
---------- ---------- ---------- ----------
Loss from operations (3,040) (9,033) (13,393) (26,069)
Net interest and other
income 345 (73) 1,068 723
---------- ---------- ---------- ----------
Loss before tax (2,695) (9,106) (12,325) (25,346)
Income tax charge/(credit) (567) 17 (562) (262)
---------- ---------- ---------- ----------
Net loss (2,128) (9,123) (11,763) (25,084)
---------- ---------- ---------- ----------
Preferred stock deemed
dividend - (9,179) - (9,179)
---------- ---------- ---------- ----------
Net loss attributable to
common stockholders $ (2,128) $ (18,302) $ (11,763) $ (34,263)
========== ========== ========== ==========
Net loss per share - basic
and diluted $ (0.05) $ (0.46) $ (0.30) $ (0.86)
Weighted average shares
outstanding - basic
and diluted 39,396,155 40,137,526 38,677,301 39,924,492
Airspan Networks Inc
Reconciliation between GAAP and Non-GAAP Statement of Income
(in thousands except for share and per share data)
Three Months
Ended
Three Months Ended July 2,
October 1, 2006 2006
GAAP Adjustments Non-GAAP Non-GAAP
---------- ---------- ---------- ----------
(unaudited) (unaudited)
Revenue $ 27,303 - $ 27,303 $ 45,435
Cost of revenue (20,047) - (20,047) (36,710)
---------- ---------- ---------- ----------
Gross profit 7,256 - 7,256 8,725
---------- ---------- ---------- ----------
Operating expenses:
Research and development 6,065 6,065 6,675
Sales and marketing 4,051 4,051 5,026
Bad debt provision 297 297 715
General and administrative 4,072 4,072 4,320
Amortization of intangibles 276 276 275
Restructuring provision 1,528 (1,528) - -
---------- ---------- ---------- ----------
Total operating expenses 16,289 (1,528) 14,761 17,011
---------- ---------- ---------- ----------
Loss from operations (9,033) (7,505) (8,286)
Net interest and other
income (73) (73) 617
---------- ---------- ----------
Loss before income taxes (9,106) (7,578) (7,669)
---------- ---------- ----------
Income tax charge/(credit) $ 17 $ 17 $ 5
---------- ---------- ----------
Net loss $ (9,123) $ (7,595) $ (7,674)
Preferred stock deemed
dividend (9,179) (9,179) -
---------- ---------- ----------
Net loss attributable to
common stockholders $ (18,302) $ (16,774) $ (7,674)
========== ========== ==========
Net loss per share - basic
and diluted $ (0.46) $ (0.42) $ (0.19)
Weighted average shares
outstanding - basic
and diluted 40,137,526 40,137,526 39,902,699
Contact Information: For Investment and Media Inquiries, contact: Peter Aronstam Senior Vice President & Chief Financial Officer Airspan Networks, Inc. Tel: +1 561 893-8682 Fax: +1 561 893-8681 Email: Email Contact