SOURCE: Ikanos Communications

Ikanos Communications

January 22, 2015 16:05 ET

Ikanos Communications Announces Results for the Fourth Quarter and Fiscal Year 2014

FREMONT, CA--(Marketwired - Jan 22, 2015) - Ikanos Communications, Inc. (NASDAQ: IKAN)

Fourth Quarter Highlights

  • Revenue of $11.5 million
  • GAAP net loss of $(10.4) million, or $(0.07) per share
  • Ending cash, cash equivalents and short-term investments of $15.7 million

Ikanos Communications, Inc. (NASDAQ: IKAN), a leading provider of advanced broadband semiconductor and software products for the connected home, today announced its financial results for the fourth quarter and fiscal year of 2014, ended December 28, 2014.

"We achieved fourth quarter revenue of $11.5 million, within our guidance, with a GAAP gross profit of 49%, which was above our guidance," said Dennis Bencala, CFO of Ikanos. "During the fourth quarter, we continued to manage our business and cash position, with operating expenses of $15.7 million, and we completed a private equity placement of $16.3 million, which contributed to our cash and short-term investments totaling $15.7 million at year-end."

"I'm pleased with our financial performance in the fourth quarter, with the revenue at the high end of our guidance and gross profits beating our guidance," said Omid Tahernia, president and CEO of Ikanos. "We continue to see positive design win momentum and market interest across the board, particularly for our inSIGHT software suite and the Vx500 gateway processor family. With an increasing number of design wins and inSIGHT field trials, our expanding ultra-broadband partnerships, and the significant potential associated with our gigabit strategy, I am encouraged by our momentum going into 2015 and beyond."

Financial Details

Ikanos reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP) and additionally on a non-GAAP basis. These financial results are unaudited and may require certain adjustments that will be reflected in Ikanos' Annual Report on Form 10-K for the year ended December 28, 2014. These adjustments may include (a) retroactive application of a previously announced reverse stock split, if effected, which will impact all share and share-related amounts including the weighted average shares and related earnings per share calculations within the condensed consolidated statements of operations and the earnings per share guidance provided below; and (b) a reclassification between prepaid expenses and stockholders' equity within the condensed consolidated balance sheet as of December 28, 2014, as a result of the allocation of expenses recognized as issuance costs upon the completion of the rights offering, which is expected to be completed on January 30, 2015.

Non-GAAP net income (loss), non-GAAP gross profits and non-GAAP operating expenses, where applicable, exclude the income statement effects of stock-based compensation and the amortization of intangible assets. 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 2014 Results

Revenue for the fourth quarter of 2014 was $11.5 million, compared to revenue of $17.6 million for the fourth quarter of 2013 and revenue of $11.1 million for the third quarter of 2014. GAAP gross profit for the fourth quarter of 2014 was 49%, compared to GAAP gross profit of 50% for the fourth quarter of 2013 and GAAP gross profit of 44% for the third quarter of 2014.

Non-GAAP gross profit for the fourth quarter of 2014 was 50%, compared to non-GAAP gross profit of 51% for the fourth quarter of 2013 and 45% for the third quarter of 2014.

GAAP operating expenses for the fourth quarter of 2014 were $15.7 million, compared to operating expenses of $17.1 million for the fourth quarter of 2013 and operating expenses of $14.8 million for the third quarter of 2014.

Non-GAAP operating expenses for the fourth quarter of 2014 were $14.7 million, compared to non-GAAP operating expenses of $16.2 million for the fourth quarter of 2013 and non-GAAP operating expenses of $13.9 million for the third quarter of 2014.

GAAP net loss for the fourth quarter of 2014 was $(10.4) million, or a loss of $(0.07) per share on 139.2 million weighted average shares outstanding, compared to a GAAP net loss of $(8.6) million, or $(0.10) per share on 85.6 million weighted average shares outstanding, for the fourth quarter of 2013 and a GAAP net loss of $(10.3) million, or $(0.10) per share on 99.3 million weighted shares outstanding, for the third quarter of 2014.

Non-GAAP net loss for the fourth quarter of 2014 was $(9.3) million, or a loss of $(0.07) per share on 139.2 million weighted average shares outstanding, compared to a non-GAAP net loss of $(7.6) million, or $(0.09) per share on 85.6 million weighted average shares outstanding, for the fourth quarter of 2013 and a non-GAAP loss of $(9.3) million, or $(0.09) per share on 99.3 million weighted average shares outstanding, for the third quarter of 2014.

Cash and cash equivalents and short-term investments at year-end were $15.7 million, compared to $6.7 million at the end of the third quarter of 2014. Year-end cash included proceeds from our September 29 private equity placement of $16.3 million. Additionally, at year-end, inventory was $2.0 million, compared to $0.9 million at the end of the third quarter of 2014. Current liabilities at year-end were $22.4 million, compared to $16.7 million at the end of the third quarter of 2014. For both the fourth quarter and third quarter of 2014, current liabilities included an accounts receivable-backed revolving line of credit advance of $10.8 million and $4.9 million, respectively.

For more complete information regarding our fourth quarter and fiscal year 2014 results please see the attached financial schedules.

Outlook

Revenue is expected to be between $10.0 million and $12.0 million for the first quarter of 2015.

GAAP gross profit for the first quarter of 2015 is expected to be between 46% and 48%. Non-GAAP gross profit is expected to be between 47% and 49% for the first quarter of 2015. GAAP operating expenses for the first quarter of 2015 are expected to be in the range of $15.5 million to $16.5 million. Non-GAAP operating expenses are expected to be in the range of $14.5 million to $15.5 million for the first quarter of 2015. GAAP net loss for the first quarter of 2015 is expected to be in the range of approximately $(9.9) million to $(12.1) million, or a GAAP loss per share of $(0.07) to $(0.09). Non-GAAP net loss is expected to be in the range of approximately $(8.8) million to $(11.0) million, or a non-GAAP loss per share of $(0.06) to $(0.08).

Fourth Quarter Conference Call

Management will review the fourth quarter financial results and its expectations for subsequent periods at a conference call on January 22, 2015 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 (888) 505-4368 or (719) 785-1765 and enter conference ID 3739087. 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 April 22, 2015 by dialing (888) 203-1112 or (719) 457-0820 and entering conference ID 3739087.

About Ikanos Communications, Inc.

Ikanos Communications, Inc. (NASDAQ: IKAN) is a leading provider of advanced broadband semiconductor and software products for the connected 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.

© 2015 Ikanos Communications, Inc. All Rights Reserved. Ikanos Communications, Ikanos and the Ikanos logo, the Bandwidth without boundaries tagline, Fusiv, inSIGHT, Neos, Ikanos Velocity, and Ikanos NodeScale 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

Some of the statements included in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current views of our senior management with respect to future events with respect to our business, including final quarter and fiscal year 2014 and future financial results, and our industry in general. Statements that include the words "expect," "intend," "plan," "believe," "anticipate," "estimate," and similar statements of a future or forward-looking nature identify forward-looking statements.

Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the following: our ability to achieve the anticipated benefits of our collaboration with Alcatel-Lucent; that new designs and design wins will result in sales of our products at the levels anticipated, or at all; new product revenue momentum may not materialize at the rate anticipated, or at all; the transition to new products will take longer than anticipated; our ability to manage operating expenses will be less successful than anticipated and not result in the cost reductions expected; the revenue generated by our mature products will decline at a rate greater than anticipated; that our carrier trials will be successful and, if successful, will eventually result in field trials or market deployments; that the delays in new customer product ramps will continue longer than anticipated; that the rate of acceptance of our new and future products, including our G.fast products, by our customers and telecommunications service providers, may be lower than anticipated; our ability to complete future products, including our G.fast products, when anticipated or at all; that the unfavorable trends in certain maturing markets, such as Japan and Korea, will continue longer than anticipated; that our design win pipeline will continue to expand as anticipated; macroeconomic or other conditions which may cause our customers to defer purchasing plans or cancel any purchasing plans altogether despite successful design wins or successful field trials; the continued demand by telecommunications service providers for our specific xDSL semiconductor products; our ability to continue to effectively manage our business, operating expenses, and cash position; the effect of closing adjustments on reported financial results; the failure of telecommunications service providers to implement deployment plans on schedule, or at all; our ability to generate demand and close transactions for the sale of our products; competition in the markets in which we operate; and the fact that the products we sell may not satisfy shifting customer demand or compete successfully with our competitors' products. For a more detailed discussion of how these and other risks and uncertainties could cause our actual results to differ materially from those indicated in our forward-looking statements, see our reports filed with SEC (available at www.sec.gov), including our Quarterly Report on Form 10-Q for the quarter ended September 28, 2014 filed on November 10, 2014.

   
IKANOS COMMUNICATIONS, INC.  
Unaudited Condensed Consolidated Statements of Operations  
(In thousands, except per share data)  
               
    Three Months Ended     Twelve Months Ended  
    December 28, 2014     December 29, 2013     December 28, 2014     December 29, 2013  
                                 
Revenue   $ 11,517     $ 17,582     $ 48,364     $ 79,749  
Cost of revenue     5,886       8,806       25,324       39,078  
    Gross profit     5,631       8,776       23,040       40,671  
Operating expenses:                                
  Research and development     11,218       12,503       48,124       51,075  
  Selling, general and administrative     4,463       4,589       17,389       18,816  
    Total operating expenses     15,681       17,092       65,513       69,891  
Loss from operations     (10,050 )     (8,316 )     (42,473 )     (29,220 )
  Interest and other income (expense), net     (239 )     (71 )     (246 )     (578 )
Loss before income taxes     (10,289 )     (8,387 )     (42,719 )     (29,798 )
  Provision for income taxes     121       246       606       589  
Net loss   $ (10,410 )   $ (8,633 )   $ (43,325 )   $ (30,387 )
Net loss per share                                
  Basic and diluted   $ (0.07 )   $ (0.10 )   $ (0.40 )   $ (0.41 )
Weighted average number of shares                                
  Basic and diluted     139,175       85,648       109,078       74,726  
                                   
                                   
IKANOS COMMUNICATIONS, INC.  
Unaudited Condensed Consolidated Statements of Operations  
(In thousands, except per share data)  
   
    Three Months Ended  
    December 28, 2014     September 28, 2014     December 29, 2013  
                         
Revenue   $ 11,517     $ 11,079     $ 17,582  
Cost of revenue     5,886       6,227       8,806  
    Gross profit     5,631       4,852       8,776  
Operating expenses:                        
  Research and development     11,218       10,822       12,503  
  Selling, general and administrative     4,463       4,000       4,589  
    Total operating expenses     15,681       14,822       17,092  
Loss from operations     (10,050 )     (9,970 )     (8,316 )
  Interest and other income (expense), net     (239 )     (120 )     (71 )
Loss before income taxes     (10,289 )     (10,090 )     (8,387 )
  Provision for income taxes     121       190       246  
Net loss   $ (10,410 )   $ (10,280 )   $ (8,633 )
                         
Basic and diluted net loss per share   $ (0.07 )   $ (0.10 )   $ (0.10 )
Weighted average outstanding shares:                        
  Basic and diluted     139,175       99,284       85,648  
 
 
IKANOS COMMUNICATIONS, INC.
Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
 
    Three Months Ended December 28, 2014   Three Months Ended December 29, 2013
    As Reported   Non-GAAP Adjustments       Non-GAAP   As Reported   Non-GAAP Adjustments       Non-GAAP
Revenue   $ 11,517   $ -       $ 11,517   $ 17,582   $ -       $ 17,582
Cost of revenue     5,886     (5)   (a)     5,761     8,806     (2)   (a)     8,684
            (120)   (b)                 (120)   (b)      
                                             
    Gross profit     5,631     (125)         5,756     8,776     (122)         8,898
                                             
Operating expenses:                                            
  Research and development     11,218     (608)   (a)     10,610     12,503     (640)   (a)     11,863
                                             
  Selling, general and administrative     4,463     (375)   (a)     4,088     4,589     (281)   (a)     4,308
                                             
    Total operating expenses     15,681     (983)         14,698     17,092     (921)         16,171
Loss from operations     (10,050)     1,108         (8,942)     (8,316)     1,043         (7,273)
  Interest and other income (expense), net     (239)     -         (239)     (71)     -         (71)
Loss before income taxes     (10,289)     1,108         (9,181)     (8,387)     1,043         (7,344)
  Provision for income taxes     121     -         121     246     -         246
Net loss   $ (10,410)   $ 1,108       $ (9,302)   $ (8,633)   $ 1,043       $ (7,590)
                                             
Net loss per share:                                            
  Basic and diluted   $ (0.07)             $ (0.07)   $ (0.10)             $ (0.09)
                                             
Weighted average outstanding shares:                                            
  Basic and diluted     139,175               139,175     85,648               85,648
                                               
Notes:                       Three Months Ended
                          December 28, 2014       December 29, 2013
  (a) Stock-based compensation               $ 988       $ 923
  (b) Amortization of acquired intangible assets     120         120
  Total non-GAAP adjustments               $ 1,108       $ 1,043
   
   
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 28, 2014  
      As Reported   Non-GAAP Adjustments           Non-GAAP  
Revenue   $ 11,079   $ -           $ 11,079  
Cost of revenue     6,227     (4 )   (a )     6,104  
            (119 )   (b )        
                             
    Gross profit     4,852     (123 )           4,975  
Operating expenses:                            
  Research and development     10,822     (531 )   (a )     10,291  
                             
  Selling, general and administrative     4,000     (343 )   (a )     3,657  
                             
    Total operating expenses     14,822     (874 )           13,948  
Loss from operations     (9,970)     997             (8,973 )
  Interest and other income (expense), net     (120)     -             (120 )
Loss before income taxes     (10,090)     997             (9,093 )
  Provision for income taxes     190     -             190  
Net loss   $ (10,280)   $ 997           $ (9,283 )
Net loss per share:                            
  Basic and diluted   $ (0.10)                 $ (0.09 )
                             
Weighted average outstanding shares:                            
  Basic and diluted     99,284                   99,284  
                             
Notes:       Three Months Ended              
        September 28, 2014              
(a) Stock-based compensation           $ 878                
(b) Amortization of acquired intangible assets     119                
  Total non-GAAP adjustments           $ 997                
 
 
IKANOS COMMUNICATIONS, INC.
Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
 
    Twelve Months Ended December 28, 2014   Twelve Months Ended December 29, 2013
  As Reported   Non-GAAP Adjustments       Non-GAAP   As Reported   Non-GAAP Adjustments       Non-GAAP
Revenue $ 48,364   $ -       $ 48,364   $ 79,749   $ -       $ 79,749
Cost of revenue   25,324     (16)   (a)     24,829     39,078     (8)   (a)     38,592
          (479)   (b)                 (478)   (b)      
    Gross profit   23,040     (495)         23,535     40,671     (486)         41,157
                                           
Operating expenses:                                          
  Research and development   48,124     (2,374)   (a)     45,750     51,075     (2,435)   (a)     48,640
                                           
  Selling, general and administrative   17,389     (1,390)   (a)     15,999     18,816     (1,130)   (a)     17,353
                                (333)   (b)      
                                           
    Total operating expenses   65,513     (3,764)         61,749     69,891     (3,898)         65,993
Loss from operations   (42,473)     4,259         (38,214)     (29,220)     4,384         (24,836)
  Interest and other income (expense), net   (246)     -         (246)     (578)     -         (578)
Loss before income taxes   (42,719)     4,259         (38,460)     (29,798)     4,384         (25,414)
  Provision for income taxes   606     -         606     589     -         589
Net loss $ (43,325)   $ 4,259       $ (39,066)   $ (30,387)   $ 4,384       $ (26,003)
                                           
Net loss per share:                                          
  Basic and diluted $ (0.40)             $ (0.36)   $ (0.41)             $ (0.35)
                                           
Weighted average outstanding shares:                                          
  Basic and dilluted   109,078               109,078     74,726               74,726
                                             
  Notes:                       Twelve Months Ended
                    December 28, 2014       December 29, 2013
(a) Stock-based compensation   $ 3,780       $ 3,573
(b) Amortization of acquired intangible assets     479         811
Total non-GAAP adjustments   $ 4,259       $ 4,384
 
 
IKANOS COMMUNICATIONS, INC.
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
             
    December 28, 2014   September 28, 2014   December 29, 2013
Assets                  
Current assets:                  
  Cash, cash equivalents and short-term investments   $ 15,691   $ 6,685   $ 39,516
  Accounts receivable     13,849     11,003     15,892
  Inventory     1,964     886     2,017
  Prepaid expenses and other current assets     3,682     3,452     3,245
    Total current assets     35,186     22,026     60,670
Property and equipment, net     8,581     9,355     8,612
Intangible assets, net     239     358     718
Other assets     2,104     1,976     1,952
    $ 46,110   $ 33,715   $ 71,952
                   
Liabilities and Stockholders' Equity                  
Current liabilities:                  
  Revolving line   $ 10,841   $ 4,937   $ 12,000
  Accounts payable     5,054     4,116     4,692
  Accrued liabilities     6,460     7,679     8,232
    Total current liabilities     22,355     16,732     24,924
Other liabilities     1,740     1,337     1,637
    Total liabilities     24,095     18,069     26,561
Stockholders' equity     22,015     15,646     45,391
    $ 46,110   $ 33,715   $ 71,952