SOURCE: Ikanos Communications

Ikanos Communications

February 08, 2010 16:05 ET

Ikanos Communications Reports Record Revenue for the Fourth Quarter 2009

Webcast and Slides Accessible on Ikanos Website

FREMONT, CA--(Marketwire - February 8, 2010) - Ikanos Communications, Inc. (NASDAQ: IKAN)

Recent Highlights:

-- Reported Record Revenue for the Fourth Quarter
-- Non-GAAP Net Income of $1.5M, Non-GAAP EPS of $0.03
-- Company Expands Development and Partners to Address Wired and Wireless
   Broadband Market Opportunities

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 fourth quarter and fiscal year ended January 3, 2010.

"Ikanos delivered record revenue and returned to profitability on a non-GAAP basis in the fourth quarter," said Michael Gulett, president and CEO of Ikanos. "We completed our first full quarter since the acquisition of the Conexant broadband business and effectively executed our business plan. We grew and diversified our revenue base across multiple regions, customers and product lines, we consolidated development efforts and reduced operating expenses, and we were able to begin redirecting engineering investments towards new markets for future growth."

Financial Highlights:

Revenue for the fourth quarter of 2009 was $58.2 million compared with revenue of $29.3 million for the third quarter of 2009 and revenue of $22.8 million for the year ago period. Revenue for the year ended January 3, 2010 was $130.7 million compared with the $106.5 million reported for the year ended December 28, 2008.

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, in-process research and development charges and gain on sale of securities. 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 schedules.

GAAP net loss for the fourth quarter of 2009 was $9.1 million, or $0.17 per share, on 53.9 million weighted average shares. This compares with a net loss of $15.5 million, or $0.40 per share, on 38.8 million weighted average shares in the third quarter of 2009 and with a net loss of $5.7 million, or $0.20 per share, on 28.9 million weighted average shares in the fourth quarter of 2008.

Non-GAAP net income for the fourth quarter of 2009 was $1.5 million, or $0.03 per diluted share, on 56.1 million weighted average shares. This compares with non-GAAP net loss of $4.5 million, or $0.12 per share, in the third quarter of fiscal 2009, and with a non-GAAP net loss of $2.4 million, or $0.08 per share, in the fourth quarter of 2008.

GAAP net loss for the year ended January 3, 2010 was $37.1 million, or $0.97 per share, on 38.1 million weighted average shares. This compares with a net loss of $41.1 million, or $1.41 per share, on 29.1 million weighted average shares for the year ago period.

Non-GAAP net loss for the year ended January 3, 2010 was $8.5 million, or $0.22 per share, compared with non-GAAP net loss of $3.0 million, or $0.10 per share, for the year ago period. Weighted average shares used in computing non-GAAP net loss per share were 38.1 million in 2009 and 29.1 million in 2008.

Recent Highlights:
--  Ikanos and picoChip -- a leading provider of femtocell technology
    products that enable new types of cellular communications service --
    are making possible single box multiservice gateways that support the
    integration of smart mobile devices into the home network. These
    products will enable improved cellular coverage and will enhance the
    mobile broadband experience with the delivery of rich media content,
    such as video to the wireless handset. Sagemcom, one of Europe's
    leading developers of advanced broadband communications equipment, has
    selected the Ikanos and picoChip-based femtocell/xDSL gateway for
    worldwide deployments.
--  Ikanos and Aricent™, a global innovation, technology and service
    company focused exclusively on communications, introduced a
    production-ready platform for advanced next-generation broadband access
    products. This combination creates a unified product for addressing
    WiMAX and Long Term Evolution (LTE) functionality and building advanced
    wireless broadband access devices including mobile broadband routers
    (MBR) and femtocell base stations.
--  Teracom Ltd. has selected the Ikanos Solos communications processor as
    the core of its high-performance integrated access devices (IADs).
    These products will be used to extend advanced wireless, voice and data
    services to millions of consumers throughout India, and other countries
    in the region. Teracom counts some of the most demanding carriers in
    the region as customers, including the largest, Bharat Sanchar Nigam
    Ltd. (BSNL).

Outlook:
--  Revenue is expected to be between $54.0 million and $58.0 million for
    the first quarter of 2010.
--  Non-GAAP gross margins are expected to be between 44% and 46% in the
    first quarter of 2010. GAAP gross margins in the first quarter of 2010
    will be lower than non-GAAP gross margins, as they will include
    amortization of acquisition-related intangibles of approximately $1.5
    million and the amortization of the fair-value of acquired inventory of
    approximately $1.5 million.
--  Non-GAAP operating expenses are expected to be in the range of $23.0 to
    $24.0 million in the first quarter of 2010. GAAP operating expenses in
    the first quarter of 2010 will be higher than non-GAAP operating
    expenses, as they will include amortization of acquisition-related
    intangibles of $0.9 million, charges related to stock-based
    compensation expense in accordance with FAS 123(R) of $0.9 to $1.1
    million and restructuring charges of $1.4 to $1.6 million. On February
    2, 2010, the Company's Board of Directors approved a restructuring
    plan, consisting of the consolidation and rebalancing of its workforce
    and the closure of a small research and development location.  The
    restructuring charges consist of estimated severance expenses of $1.2
    to $1.4 million and facility exit costs of approximately $0.2 million.

Fourth Quarter and Fiscal Year 2009 Conference Call:

Management will review the fourth quarter and fiscal year 2009 financial results and its expectations for subsequent periods at a conference call on February 8, 2010 at 2:00 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 53689862. The webcast will be archived and available through February 15, 2010 at http://www.ikanos.com/investor/webcasts/ or by calling 706-645-9291 and enter pass code 53689862.

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.

© 2010 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 first quarter of 2010, expected gross margins for the first quarter of 2010, expected operating expenses for the first quarter of 2010, engineering investments in PON and wired home networking technologies, and new product deployments with picoChip, Aricent, and Teracom Ltd.. 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 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, our ability to develop commercially successful products as a result of our current research and development programs, 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        Year Ended
                                --------------------  --------------------
                                 January    December   January   December
                                    3,         28,       3,         28,
                                   2010       2008      2010       2008
                                ---------  ---------  ---------  ---------

Revenue                         $  58,191  $  22,775  $ 130,688  $ 106,505
Cost of revenue                    40,590     13,562     85,019     61,827
                                ---------  ---------  ---------  ---------
   Gross profit                    17,601      9,213     45,669     44,678
                                ---------  ---------  ---------  ---------
Operating expenses:
 Research and development          18,061      9,715     49,805     43,231
 Selling, general and
  administrative                    9,679      5,541     30,974     25,823
 Asset impairments                      -          -      2,460     12,496
 Restructuring charges                290          -      1,338          -
                                ---------  ---------  ---------  ---------
   Total operating expenses        28,030     15,256     84,577     81,550
                                ---------  ---------  ---------  ---------
Loss from operations              (10,429)    (6,043)   (38,908)   (36,872)
 Investment gain (impairment)       1,238          -      1,238     (6,166)
 Interest income, net                 124        476        727      2,145
                                ---------  ---------  ---------  ---------
Loss before income taxes           (9,067)    (5,567)   (36,943)   (40,893)
 Provision for income taxes            47        123        158        220
                                ---------  ---------  ---------  ---------
Net loss                        $  (9,114) $  (5,690) $ (37,101) $ (41,113)
                                =========  =========  =========  =========

Basic and diluted net loss per
 share                          $   (0.17) $   (0.20) $   (0.97) $   (1.41)
                                =========  =========  =========  =========
Weighted average number of
 shares                            53,883     28,917     38,098     29,084
                                =========  =========  =========  =========




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


                 Three Months Ended             Three Months Ended
                  January 3, 2010                December 28, 2008
          -------------------------------- -------------------------------
              As     Non-GAAP                 As     Non-GAAP
           Reported  Adjustments  Non-GAAP Reported  Adjustments  Non-GAAP
           --------  --------      ------- --------  -------      --------
Revenue    $ 58,191  $      -      $58,191 $ 22,775  $     -      $ 22,775
Cost of
 revenue     40,590      (104) (a)  32,693   13,562      (75) (a)   12,387
                  -    (1,803) (b)       -        -     (763) (b)        -
                  -    (5,990) (c)       -        -     (337) (c)        -
           --------  --------      ------- --------  -------      --------
  Gross
   profit    17,601    (7,897)      25,498    9,213   (1,175)       10,388
           --------  --------      ------- --------  -------      --------

Operating
 expenses:
 Research
  and
  devel-
  opment     18,061      (947) (a)  17,114    9,715   (1,031) (a)    8,684
 Selling,
  general
  and
  administra-
  tive        9,679      (449) (a)   6,924    5,541     (734) (a)    4,436
                  -    (2,306) (b)       -        -     (371) (b)        -
 Restruc-
  turing
  charges       290      (290) (d)       -        -        -             -
           --------  --------      ------- --------  -------      --------
  Total
   operating
   expenses  28,030    (3,992)      24,038   15,256   (2,136)       13,120
           --------  --------      ------- --------  -------      --------
Loss from
 operations (10,429)   11,889        1,460   (6,043)   3,311        (2,732)
 Investment
  gain        1,238    (1,238) (e)       -        -        -             -
 Interest
  income
  and other,
  net           124         -          124      476        -           476
           --------  --------      ------- --------  -------      --------
Loss
 before
 income
 taxes       (9,067)   10,651        1,584   (5,567)   3,311        (2,256)
Provision
 for
 income
 taxes           47         -           47      123        -           123
           --------  --------      ------- --------  -------      --------
Net income
 (loss)    $ (9,114) $ 10,651      $ 1,537 $ (5,690) $ 3,311      $ (2,379)
           ========  ========      ======= ========  =======      ========

Net income
 (loss)
 per
 share:
  Basic    $  (0.17)               $  0.03 $  (0.20)              $  (0.08)
  Diluted  $  (0.17)               $  0.03 $  (0.20)              $  (0.08)
Weighted
 average
 outstanding
 shares:
  Basic      53,883                 53,883   28,917                 28,917
  Diluted    53,883                 56,058   28,917                 28,917


Notes:                                                  Three Months Ended
                                                        ------------------
                                                         January   December
                                                         3, 2010   28, 2008
                                                        --------  ---------
 (a)   Stock-based compensation                         $  1,500  $   1,840
 (b)   Amortization of acquired intangible assets          4,109      1,134
 (c)   Fair-value adjustment of acquired inventory         5,990        337
 (d)   Restructuring charges                                 290          -
 (e)   Gain on sale of securities                         (1,238)         -
                                                        --------  ---------
       Total non-GAAP adjustments                       $ 10,651  $   3,311
                                                        ========  =========




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


                                                Year Ended
                                              January 3, 2010
                                     ------------------------------------
                                         As       Non-GAAP
                                     Reported   Adjustments      Non-GAAP
                                     ---------  -----------      --------
Revenue                              $ 130,688  $         -      $130,688
Cost of revenue                         85,019         (313) (a)   72,950
                                             -       (4,275) (b)        -
                                             -       (7,481) (c)        -
                                     ---------  -----------      --------
    Gross profit                        45,669      (12,069)       57,738
                                     ---------  -----------      --------

Operating expenses:
  Research and development              49,805       (3,261) (a)   46,094
                                             -         (450) (d)        -
                                             -            -             -
                                             -            -             -
  Selling, general and
   administrative                       30,974       (2,346) (a)   20,707
                                             -       (3,932) (b)        -
                                             -       (3,989) (d)        -
  Asset impairments                      2,460       (2,460) (e)        -
  Restructuring charges                  1,338       (1,338) (f)        -
                                     ---------  -----------      --------
    Total operating expenses            84,577      (17,776)       66,801
                                     ---------  -----------      --------
Loss from operations                   (38,908)      29,845        (9,063)
  Investment gain (impairment)           1,238       (1,238) (g)        -
  Interest income and other, net           727            -           727
                                     ---------  -----------      --------
Loss before income taxes               (36,943)      28,607        (8,336)
Provision for income taxes                 158            -           158
                                     ---------  -----------      --------
Net loss                             $ (37,101) $    28,607      $ (8,494)
                                     =========  ===========      ========

Net loss per share:
    Basic                            $   (0.97)                  $  (0.22)
    Diluted                          $   (0.97)                  $  (0.22)
Weighted average outstanding shares:
    Basic                               38,098                     38,098
    Diluted                             38,098                     38,098


                                                Year Ended
                                              December 28, 2008
                                     ------------------------------------
                                         As       Non-GAAP
                                     Reported   Adjustments      Non-GAAP
                                     ---------  -----------      --------
Revenue                              $ 106,505  $         -      $ 106,505
Cost of revenue                         61,827         (305) (a)    56,215
                                             -       (3,507) (b)         -
                                             -       (1,800) (c)         -
                                     ---------  -----------      ---------
    Gross profit                        44,678       (5,612)        50,290
                                     ---------  -----------      ---------

Operating expenses:
  Research and development              43,231       (5,258) (a)    37,186
                                             -         (375) (b)         -
                                             -         (102) (h)         -
                                             -         (310) (e)         -
  Selling, general and
   administrative                       25,823       (4,923) (a)    17,998
                                             -       (2,270) (b)         -
                                             -         (632) (h)         -
  Asset impairments                     12,496      (12,496) (e)         -
  Restructuring charges                      -            -              -
                                     ---------  -----------      ---------
    Total operating expenses            81,550      (26,366)        55,184
                                     ---------  -----------      ---------
Loss from operations                   (36,872)      31,978         (4,894)
  Investment gain (impairment)          (6,166)       6,166  (g)         -
  Interest income and other, net         2,145            -          2,145
                                     ---------  -----------      ---------
Loss before income taxes               (40,893)      38,144         (2,749)
Provision for income taxes                 220            -            220
                                     ---------  -----------      ---------
Net loss                             $ (41,113) $    38,144      $  (2,969)
                                     =========  ===========      =========

Net loss per share:
    Basic                            $   (1.41)                  $   (0.10)
    Diluted                          $   (1.41)                  $   (0.10)
Weighted average outstanding shares:
    Basic                               29,084                      29,084
    Diluted                             29,084                      29,084


Notes:                                                      Year Ended
                                                        ------------------
                                                        January   December
                                                        3, 2010   28, 2008
                                                        --------  ---------
 (a)   Stock-based compensation                         $  5,920  $  10,486
 (b)   Amortization of acquired intangible assets          8,207      6,152
 (c)   Fair-value adjustment of acquired inventory         7,481      1,800
 (d)   Transaction-related expenses                        4,439          -
 (e)   Impairments of assets and in-process R&D            2,460     12,806
 (f)   Restructuring charges                               1,338          -
 (g)   Investment (gain) impairment                       (1,238)     6,166
 (h)   Severance                                               -        734
                                                        --------  ---------
       Total non-GAAP adjustments                       $ 28,607  $  38,144
                                                        ========  =========




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

                                                        January   December
                                                           3,       28,
                                                          2010      2008
                                                        --------- ---------
                      Assets
Current assets:
  Cash, cash equivalents and short-term investments     $  27,540 $  63,339
  Accounts receivable, net                                 34,995    12,360
  Inventory                                                35,050    12,489
  Prepaid expenses and other current assets                 2,155     1,744
                                                        --------- ---------
    Total current assets                                   99,740    89,932
Property and equipment, net                                 7,502     9,597
Intangible assets, net                                     25,359     6,290
Goodwill                                                    8,633         -
Other assets                                                1,766     1,614
                                                        --------- ---------
                                                        $ 143,000 $ 107,433
                                                        ========= =========


       Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                                      $  26,641 $   9,237
  Accrued liabilities                                      17,050     8,680
                                                        --------- ---------
    Total current liabilities                              43,691    17,917
Other liabilities                                           2,193         -
                                                        --------- ---------
      Total liabilities                                    45,884    17,917
Stockholders' equity                                       97,116    89,516
                                                        --------- ---------
                                                        $ 143,000 $ 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