SOURCE: Ikanos Communications

Ikanos Communications

February 02, 2012 16:07 ET

Ikanos Communications Announces Results for the Fiscal Year 2011 and Fourth Quarter 2011

FREMONT, CA--(Marketwire - Feb 2, 2012) - Ikanos Communications, Inc. (NASDAQ: IKAN)

Recent Highlights:

  • Fourth Quarter 2011 Revenue of $35.4 Million
  • Fourth Quarter 2011 GAAP Net Income of $545 Thousand, or $0.01 Per Share
  • Year End 2011 Cash and Cash Equivalents of $34.8 Million
  • Continued Progress on NodeScale® Vectoring Including Successful Lab Trials
  • First Production Orders for Fusiv® Vx185 and Fusiv Vx173

Ikanos Communications, Inc. (NASDAQ: IKAN), a leading provider of advanced broadband semiconductor and software products for the digital home, today announced its financial results for the fourth quarter and fiscal year ended January 1, 2012.

"Ikanos' fourth quarter revenue of $35.4 million along with higher than expected GAAP gross profit of 56% and positive earnings per share were driven by the sale of our broadband DSL chipsets and communications processors," said Dennis Bencala, chief financial officer and vice president finance of Ikanos. "Ikanos finished the fiscal year with reduced operating expenses and positive annual cash flow. In addition, we delivered initial samples of our latest communication processors to the market and made substantial progress on the design and development of our NodeScale Vectoring products."

Financial Details
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), non-GAAP gross profits, non-GAAP operating expenses and non-GAAP earnings per share, where applicable, exclude the income statement effects of stock-based compensation, restructuring charges, prepaid royalty write-offs, gains on sales of impaired securities ("Investment gain"), one time severance expenses, amortization of intangible assets and asset impairments, fair value adjustment of the acquired inventory. Ikanos has provided these measures because its 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 schedules.

Fourth Quarter 2011 Results
Revenue for the fourth quarter of 2011 was $35.4 million compared to revenue of $35.4 million for the third quarter of 2011 and revenue of $37.1 million for the fourth quarter of 2010. GAAP gross profit for the fourth quarter of 2011 was 56% compared to a GAAP gross profit of 50% for the third quarter of 2011 and GAAP gross profit of 46% for the fourth quarter of 2010.

Non-GAAP gross profit for the fourth quarter of 2011 was 57% compared to a non-GAAP gross profit of 52% for the third quarter of 2011 and non-GAAP gross profit of 47% for the fourth quarter of 2010.

GAAP operating expenses for the fourth quarter of 2011 were $18.0 million, compared to operating expenses of $19.9 million for the third quarter of 2011 and operating expenses of $18.6 million for the fourth quarter of 2010.

Non-GAAP operating expenses for the fourth quarter of 2011 were $17.4 million, compared to non-GAAP operating expenses of $18.8 million for the third quarter of 2011 and non-GAAP operating expenses of $17.4 million for the fourth quarter of 2010.

GAAP net income for the fourth quarter of 2011 was $0.5 million, or earnings of $0.01 per share on 69.7 million weighted average shares outstanding. This compares with a net loss of $(2.2) million, or a loss of $(0.03) per share on 68.8 million weighted average shares outstanding for the third quarter of 2011 and a net loss of $(1.4) million, or a loss of $(0.02) per share on 63.0 million weighted average shares outstanding for the fourth quarter of 2010.

Non-GAAP net income for the fourth quarter of 2011 was $1.6 million, or earnings of $0.02 per share on 69.7 million weighted average shares outstanding compared to a non-GAAP net loss of $(0.5) million, or a loss of $(0.01) per share on 68.8 million weighted average shares outstanding for the third quarter of 2011, and to a non-GAAP net income of $0.3 million, or $0.01 per share, on 63.8 million weighted average shares outstanding in the fourth quarter of 2010.

Cash, cash equivalents and short-term investments at the end of fiscal 2011 were $34.8 million compared to $36.3 million at the end of the third quarter of 2011 and $31.0 million at the end of fiscal year 2010.

Additionally, at the end of the fiscal 2011 inventory was $9.5 million compared to $13.3 million at the end of the third quarter of 2011 and $17.0 million at the end of fiscal 2010. Current liabilities at the end of the fiscal 2011 were $16.1 million compared to $21.4 million at the end of the third quarter of 2011 and $23.7 million at the end of fiscal year 2010.

Fiscal 2011 Results
Revenue for fiscal year 2011 was $136.6 million compared with $191.7 million reported for fiscal year 2010.

GAAP net loss for the year ended January 1, 2012 was $(7.5) million, or $(0.11) per share, on 68.7 million weighted average shares. This compares with a net loss of $(49.8) million, or $(0.88) per share, on 56.7 million weighted average shares for fiscal year 2010.

Non-GAAP net loss for the year ended January 1, 2012 was $(3.2) million, or $(0.05) per share, on 68.7 million weighted average shares outstanding. This compares with a net loss of $(9.7) million, or $(0.17) per share, on 56.7 million weighted average shares outstanding for fiscal year 2010.

Outlook
Revenue is expected to be between $29 million and $31 million for the first quarter of 2012.

GAAP gross profit for the first quarter of 2012 is expected to be between 48% and 50%. Non-GAAP gross profit is expected to be between 49% and 51% for the first quarter of 2012.

GAAP operating expenses for the first quarter of 2012 are expected to be in the range of $20 million to $21 million. Non-GAAP operating expenses are expected to be in the range of $19 million to $20 million for the first quarter of 2012.

Restructuring Plan
In an effort to manage the Company's operating expense to its projected revenue forecast, the Company has initiated a worldwide restructuring plan in the first quarter of this year which will result in approximately a 16% headcount reduction. Although the restructuring plan is expected to result in approximately $5.0 million in annual operating expense reductions these cost savings are expected to be offset by new product tape-out expenses that will occur throughout 2012.

As part of the restructuring, the Company expects to incur a total pre-tax restructuring charge in the range of $1.25 million to $1.5 million in 2012. This charge will include expenses related to the severance for terminated employees and other exit-related costs arising from contractual and other obligations.

"Ikanos remains focused on delivering its next-generation broadband access products and technologies including NodeScale Vectoring and the new Fusiv family of communications processors," said Bencala. "The restructuring plan will enable us to continue focusing our engineering resources on these new products which are gaining acceptance in the marketplace because of their superior performance over competing solutions."

Product Updates
In March 2011, Ikanos introduced its latest generation of communications processors, the Fusiv Vx185 and Vx183 products. These products are NodeScale Vectoring compatible and include VDSL bonding technology for increasing both the data rates and reach of fiber-to-the-node networks. The Company has won a total of seven gateway design wins with the Vx185 and Vx183 and in the fourth quarter of 2011 received its first production orders for these products. Ikanos expects to begin volume shipments in the second quarter of 2012.

In September 2011, Ikanos announced its new Fusiv Vx175 and 173 products. These two dual-core communications processors are targeted for fiber and wireless broadband networks. The Company won its first service provider customer for deployment in a fiber-to-the-home (FTTH) gateway in the third quarter of 2011. That FTTH gateway design was completed in the fourth quarter of 2011 and Ikanos expects volume shipments later this year.

In broadband DSL, Ikanos' patent-pending NodeScale Vectoring technology products continue to outperform competing solutions in lab trials around the world. Ikanos' NodeScale Vectoring technology successfully completed nine trials as of the fourth quarter of 2011. In each case, Ikanos showed significantly higher performance than competing offerings. Ikanos' technology delivers full vectoring and is capable of scaling to support the entire network -- up to 384 ports and beyond.

Fourth Quarter Conference Call
Management will review the fourth quarter financial results and its expectations for subsequent periods at a conference call on Thursday, February 2, 2012 at 1:30 p.m. Pacific Time. To listen to the call, please visit http://www.ikanos.com/investor/irevents/ and click on the link provided for the webcast or dial (877) 277-3221 and enter conference ID 41701964. The webcast will be archived and available for 90 days at http://www.ikanos.com/investor/irevents/. A replay of the conference call will be accessible until May 2, 2012 by dialing (855) 859-2056 or (404) 537-3406 and entering conference ID 41701964.

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.

© 2012 Ikanos Communications, Inc. All Rights Reserved. Ikanos Communications, Ikanos, the Ikanos logo, the Bandwidth without boundaries tagline, Fusiv, Ikanos Velocity and NodeScale Vectoring 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 press release contains forward-looking statements that are subject to risks and uncertainties concerning Ikanos Communications, including statements regarding our outlook, such as our expected revenue, gross profits, operating expenses, and the benefits of non-GAAP measures, our restructuring plan, product testing and shipment, and anticipated benefits of our products. 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, macroeconomic conditions which may cause our customers to defer purchasing plans, our ability to deliver full production releases of our newer products and the acceptance of those products by our customers, the continued demand by telecommunications service providers for specific xDSL 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, our ability to develop commercially successful products as a result of our current research and development programs, our ability to successfully execute our restructuring plan, 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 Twelve Months Ended
January 1, 2012 January 2, 2011 January 1, 2012 January 2, 2011
Revenue $ 35,443 $ 37,143 $ 136,591 $ 191,677
Cost of revenue 15,556 20,223 65,944 126,692
Gross profit 19,887 16,920 70,647 64,985
Operating expenses:
Research and development 13,069 12,796 55,796 60,769
Selling, general and administrative 4,955 5,294 22,287 27,239
Asset impairments - - - 21,378
Restructuring charges (credits) - 554 (109 ) 5,794
Total operating expenses 18,024 18,644 77,974 115,180
Income (loss) from operations 1,863 (1,724 ) (7,327 ) (50,195 )
Investment gain - - 1,295 -
Interest income and other, net (161 ) (12 ) (383 ) 51
Income (loss) before income taxes 1,702 (1,736 ) (6,415 ) (50,144 )
Provision for (benefit from) income taxes 1,157 (362 ) 1,082 (381 )
Net income (loss) $ 545 $ (1,374 ) $ (7,497 ) $ (49,763 )
Net income (loss) per share
Basic $ 0.01 $ (0.02 ) $ (0.11 ) $ (0.88 )
Diluted $ 0.01 $ (0.02 ) $ (0.11 ) $ (0.88 )
Weighted average number of shares
Basic 69,182 63,025 68,656 56,713
Diluted 69,658 63,025 68,656 56,713
IKANOS COMMUNICATIONS, INC.
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended
January 1, 2012 October 2, 2011 January 2, 2011
Revenue $ 35,443 $ 35,420 $ 37,143
Cost of revenue 15,556 17,590 20,223
Gross profit 19,887 17,830 16,920
Operating expenses:
Research and development 13,069 14,402 12,796
Selling, general and administrative 4,955 5,528 5,294
Restructuring charges (credits) - - 554
Total operating expenses 18,024 19,930 18,644
Income (loss) from operations 1,863 (2,100 ) (1,724 )
Interest income and other, net (161 ) (311 ) (12 )
Income (loss) before income taxes 1,702 (2,411 ) (1,736 )
Provision for (benefit from) income taxes 1,157 (261 ) (362 )
Net income (loss) $ 545 $ (2,150 ) $ (1,374 )
Net income (loss) per share
Basic $ 0.01 $ (0.03 ) $ (0.02 )
Diluted $ 0.01 $ (0.03 ) $ (0.02 )
Weighted average number of shares
Basic 69,182 68,807 63,025
Diluted 69,658 68,807 63,025
IKANOS COMMUNICATIONS, INC.
Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended January 1, 2012 Three Months Ended January 2, 2011
As Reported Non-GAAP Adjustments Non-GAAP As Reported Non-GAAP Adjustments Non-GAAP
Revenue $ 35,443 $ - $ 35,443 $ 37,143 $ - $ 37,143
Cost of revenue 15,556 9 (a ) 15,065 20,223 (20 ) (a ) 19,703
(500 ) (b ) (500 ) (b )
Gross profit 19,887 (491 ) 20,378 16,920 (520 ) 17,440
Operating expenses:
Research and development 13,069 (354 ) (a ) 12,715 12,796 (285 ) (a ) 12,511
Selling, general and administrative 4,955 (124 ) (a ) 4,706 5,294 (235 ) (a ) 4,934
(125 ) (b ) (125 ) (b )
Restructuring charges (credits) - - - 554 (554 ) (c ) -
Total operating expenses 18,024 (603 ) 17,421 18,644 (1,199 ) 17,445
Income (loss) from operations 1,863 1,094 2,957 (1,724 ) 1,719 (5 )
Interest income and other, net (161 ) - (161 ) (12 ) - (12 )
Income (loss) before income taxes 1,702 1,094 2,796 (1,736 ) 1,719 (17 )
Provision for (benefit from) income taxes 1,157 - 1,157 (362 ) - (362 )
Net income (loss) $ 545 $ 1,094 $ 1,639 $ (1,374 ) $ 1,719 $ 345
Net income (loss) per share:
Basic $ 0.01 $ 0.02 $ (0.02 ) $ 0.01
Diluted $ 0.01 $ 0.02 $ (0.02 ) $ 0.01
Weighted average outstanding shares:
Basic 69,182 69,182 63,025 63,025
Diluted 69,658 69,658 63,025 63,792
Notes: Three Months Ended
January 1, 2012 January 2, 2011
(a) Stock-based compensation $ 469 $ 540
(b) Amortization of acquired intangible assets 625 625
(c) Restructuring charges (credits) - 554
Total non-GAAP adjustments $ 1,094 $ 1,719
IKANOS COMMUNICATIONS, INC.
Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended October 2, 2011
As Reported Non-GAAP Adjustments Non-GAAP
Revenue $ 35,420 $ - $ 35,420
Cost of revenue 17,590 (11 ) (a ) 17,079
(500 ) (b )
Gross profit 17,830 (511 ) 18,341
Operating expenses:
Research and development 14,402 (772 ) (a ) 13,630
Selling, general and administrative 5,528 (194 ) (a ) 5,209
(125 ) (b )
Total operating expenses 19,930 (1,091 ) 18,839
Income (loss) from operations (2,100 ) 1,602 (498 )
Interest income and other, net (311 ) - (311 )
Income (loss) before income taxes (2,411 ) 1,602 (809 )
Provision for (benefit from) income taxes (261 ) - (261 )
Net income (loss) $ (2,150 ) $ 1,602 $ (548 )
Net income (loss) per share:
Basic and diluted $ (0.03 ) $ (0.01 )
Weighted average outstanding shares:
Basic and diluted 68,807 68,807
Notes: Three Months Ended
October 2,
2011
(a) Stock-based compensation $ 977
(b) Amortization of acquired intangible assets 625
Total non-GAAP adjustments $ 1,602
IKANOS COMMUNICATIONS, INC.
Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Twelve Months Ended January 1, 2012 Twelve Months Ended January 2, 2011
As Reported Non-GAAP Adjustments Non-GAAP As Reported Non-GAAP Adjustments Non-GAAP
Revenue $ 136,591 $ - $ 136,591 $ 191,677 $ - $ 191,677
Cost of revenue 65,944 (58 ) (a ) 63,886 126,692 (106 ) (a ) 120,451
(2,000 ) (b ) (3,986 ) (b )
(1,497 ) (c )
(652 ) (d )
Gross profit 70,647 (2,058 ) 72,705 64,985 (6,241 ) 71,226
Operating expenses:
Research and development 55,796 (2,273 ) (a ) 53,523 60,769 (1,684 ) (a ) 59,085
Selling, general and administrative 22,287 (844 ) (a ) 20,943 27,239 (1,480 ) (a ) 22,252
- (500 ) (b ) (2,527 ) (b )
(980 ) (e )
Asset impairments - 21,378 (21,378 ) (f ) -
Restructuring charges (credits) (109 ) 109 (g ) - 5,794 (5,794 ) (g ) -
Total operating expenses 77,974 (3,508 ) 74,466 115,180 (33,843 ) 81,337
Income (loss) from operations (7,327 ) 5,566 (1,761 ) (50,195 ) 40,084 (10,111 )
Investment gain 1,295 (1,295 ) (h ) - - - -
Interest income and other, net (383 ) - (383 ) 51 - 51
Income (loss) before income taxes (6,415 ) 4,271 (2,144 ) (50,144 ) 40,084 (10,060 )
Provision for (benefit from) income taxes 1,082 - 1,082 (381 ) - (381 )
Net income (loss) $ (7,497 ) $ 4,271 $ (3,226 ) $ (49,763 ) $ 40,084 $ (9,679 )
Net income (loss) per share:
Basic and diluted $ (0.11 ) $ (0.05 ) $ (0.88 ) $ (0.17 )
Weighted average outstanding shares:
Basic and dilluted 68,656 68,656 56,713 56,713
Notes: Twelve Months Ended
January 1,
2012
January 2,
2011
(a) Stock-based compensation $ 3,175 $ 3,270
(b) Amortization of acquired intangible assets 2,500 6,513
(c) Fair value adjustment of acquired inventory - 1,497
(d) Prepaid royalty write-off - 652
(e) Certain one-time severance - 980
(f) Impairments of intangibles and goodwill - 21,378
(g) Restructuring charges (credits) (109 ) 5,794
(h) Investment gain (1,295 ) -
Total non-GAAP adjustments $ 4,271 $ 40,084
IKANOS COMMUNICATIONS, INC.
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
January 1, October 2, January 2,
2012 2011 2011
Assets
Current assets:
Cash, cash equivalents and short-term investments $ 34,760 $ 36,264 $ 30,950
Accounts receivable, net 18,308 15,596 24,147
Inventory 9,474 13,303 17,046
Prepaid expenses and other current assets 2,531 2,822 2,096
Total current assets 65,073 67,985 74,239
Property and equipment, net 7,036 7,109 8,214
Intangible assets, net 3,602 4,227 6,102
Other assets 1,896 1,832 1,142
$ 77,607 $ 81,153 $ 89,697
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 5,413 $ 9,886 $ 10,401
Accrued liabilities 10,734 11,485 13,297
Total current liabilities 16,147 21,371 23,698
Other liabilities 738 478 478
Total liabilities 16,885 21,849 24,176
Stockholders' equity 60,722 59,304 65,521
$ 77,607 $ 81,153 $ 89,697

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