SOURCE: Ikanos Communications

Ikanos Communications

February 10, 2011 16:14 ET

Ikanos Reports Results for the Fourth Quarter 2010

Webcast Accessible on Ikanos Website

FREMONT, CA--(Marketwire - February 10, 2011) - Ikanos Communications, Inc. (NASDAQ: IKAN)

Recent Highlights:

  • Substantially completed its worldwide restructuring plan
  • Increased cash, cash equivalents, and investments to $31 million through underwritten public stock offering and lower operating expenses
  • Delivered continued progress on NodeScale™ Vectoring technology

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 2, 2011.

"In the last two quarters, Ikanos made a number of strategic moves to strengthen its financial position and adjust operations to meet our revenue expectations," said John Quigley, CEO and president of Ikanos. "We restructured the Company, began transitioning away from lower-margin products, established a compelling roadmap of differentiated products, and put in place new program management tools and processes to help us better manage expenses and the overall business. All of these elements contributed to our results and non-GAAP profit in the fourth quarter."

Financial Details:

Ikanos reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP), and provides certain supplemental financial information which include the following non-GAAP measures: non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP net income (loss) and non-GAAP net income (loss) per share. These non-GAAP measures are calculated by excluding certain items that generally are non-recurring events or are non-cash items including, among others, stock-based compensation, amortization of acquired intangible assets, asset impairments of intangibles and goodwill, and fair value adjustments of acquired inventory. These non-GAAP measures also exclude items which Ikanos' management does not consider in evaluating its on-going business, such as restructuring charges, certain one-time severance expenses, certain prepaid write-offs, and certain expenses resulting from acquisitions such as transaction-related expenses. Ikanos considers the non-GAAP information to be important because it believes it provides better transparency and clarity into Ikanos' operational results and is used by Ikanos' management for that purpose. In addition, investors often use measures such as these to evaluate the financial performance of a company. These non-GAAP measures are presented for supplemental informational purposes only for understanding Ikanos' operating results. These non-GAAP results should not be considered a substitute for cost of revenue, gross profit, operating expenses, net income (loss) or net income (loss) per share presented in accordance with GAAP, and the non-GAAP measures may be different from non-GAAP measures used by other companies.

For a reconciliation of GAAP versus non-GAAP financial information, please see the attached schedules.

Revenue for the fourth quarter of 2010 was $37.1 million compared with revenue of $41.5 million for the third quarter of 2010 and revenue of $58.2 million for the fourth quarter of 2009. Revenue for the year ended January 2, 2011 was $191.7 million compared with the $130.7 million reported for the year ended January 3, 2010.

GAAP operating expenses for the fourth quarter of 2010 were $18.6 million, after deducting a research and development credit of $1.3 million offset by restructuring charges of $0.6 million. The third quarter GAAP operating expenses were $46.4 million, which included an asset impairment charge of $21.4 million for write-downs of goodwill and acquisition-related intangibles and restructuring charges of $3.8 million.

Non-GAAP operating expenses for the fourth quarter of 2010 were $17.4 million, after deducting the research and development credit of $1.3 million. The third quarter non-GAAP operating expenses were $20.2 million.

GAAP net loss for the fourth quarter of 2010 was $(1.4) million, or $(0.02) per share, on 63.0 million weighted average shares. This compares with a net loss of $(33.3) million, or $(0.61) per share, on 54.9 million weighted average shares in the third quarter of 2010 and with a net loss of $(9.1) million, or $(0.17) per share, on 53.9 million weighted average shares in the fourth quarter of 2009.

Non-GAAP net income for the fourth quarter of 2010 was $0.3 million, or $0.01 per diluted share, on 63.8 million weighted average shares. This compares with non-GAAP net loss of $(5.5) million, or $(0.10) per share, in the third quarter of fiscal 2010, and with non-GAAP net income of $1.5 million, or $0.03 per share, in the fourth quarter of 2009.

GAAP net loss for the year ended January 2, 2011 was $(49.8) million, or $(0.88) per share, on 56.7 million weighted average shares. This compares with a net loss of $(37.1) million, or $(0.97) per share, on 38.1 million weighted average shares for the fourth quarter of 2009.

Non-GAAP net loss for the year ended January 2, 2011 was $(9.7) million, or $(0.17) per share, compared with non-GAAP net loss of $(8.5) million, or $(0.22) per share, for the fourth quarter of 2009. Weighted average shares used in computing non-GAAP net loss per share were 56.7 million in 2010 and 38.1 million in 2009.

The 2010 fiscal year-end cash, cash equivalents, and short-term investments increased to $31 million as compared to $27.5 million at fiscal year-end 2009. Additionally, the 2010 fiscal year-end inventory balance decreased to $17 million as compared to $35 million at fiscal year-end 2009, and current liabilities decreased to $23.7 million as compared to $43.7 million, respectively.

Recent Highlights:

  • Ikanos filed a shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission on November 1, 2010. Utilizing the registration statement, Ikanos closed an underwritten public offering of its common stock during the fourth quarter. In this offering, Ikanos issued a total of 12.8 million shares of common stock at $1.05 per share. The net proceeds to Ikanos from the sale of shares were approximately $12.5 million net of the underwriting discount and offering expenses.
  • On January 7, 2011, Ikanos announced the addition of R. Douglas Norby to its board of directors as a non-executive director. Norby was appointed to the Audit Committee as the designated financial expert and was appointed to the Nominating and Corporate Governance Committee.
  • During the fourth quarter of 2010, Ikanos continued to make significant progress on its NodeScale Vectoring product. Ikanos' patent-pending DSL access technology enables customers, such as ZTE Corporation, to achieve performance previously unattainable from service provider networks.

"Ikanos bolstered its financial foundation with an underwritten round of financing in the fourth quarter of 2010, raising $12.5 million," continued Quigley. "We believe these additional funds will provide us with sufficient working capital for ongoing operations, the launch of new central office and customer premises products this year, and the development of next-generation products including our NodeScale Vectoring platform and advanced processors."

Outlook:

  • Revenue is forecasted to be between $31.0 million and $34.0 million for the first quarter of 2011.
  • GAAP gross margins in the first quarter of 2011 are forecasted to between 46% and 48%. Non-GAAP gross margins are forecasted to be between 47% and 49% in the first quarter of 2011.
  • GAAP operating expenses in the first quarter of 2011 are forecasted to be in the range of $20 to $21 million. Non-GAAP operating expenses are forecasted to be in the range of $19 to $20 million in the first quarter of 2011.

Fourth Quarter and Fiscal Year 2010 Conference Call:
Management will review the fourth quarter and fiscal year ended January 2, 2011 financial results and its expectations for subsequent periods at a conference call on February 10, 2011 at 1:30 p.m. Pacific Time. To listen to the call, please visit http://www.ikanos.com/investor/webcasts and click on the link provided for the webcast or dial (877) 288-7443 and enter conference ID 37697498. The webcast will be archived and available through February 17, 2011 at http://www.ikanos.com/investor/webcasts/ or by calling (800) 642-1687 and entering conference ID 37697498.

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

© 2011 Ikanos Communications, Inc. All Rights Reserved. Ikanos Communications, Ikanos, the Ikanos logo, the "Bandwidth Without Boundaries" tagline, Fusiv, Fx, FxS, iQV, Ikanos Velocity and Ikanos 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, Inc., including statements regarding the benefits of Ikanos' management tools and processes, Ikanos' ability to manage its expenses and overall business, the sufficiency of Ikanos' working capital, its financial outlook, such as Ikanos' expected revenue for the first quarter of 2011, expected gross margins for the first quarter of 2011, expected operating expenses for the first quarter of 2011, and the objectives and anticipated results and benefits of our business strategy, including its product offerings, benefits of its products, its expectations regarding the impact of new advanced products benefits of non-GAAP measures, and statements regarding Ikanos NodeScale Vectoring. 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 Ikanos' customers to defer purchasing plans, Ikanos' ability to deliver full production releases of its newer products and the acceptance of those products by Ikanos' 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, Ikanos' continued ability to obtain and deliver production volumes of new and current products and technologies, Ikanos' ability to generate demand and close transactions for the sale of its products, Ikanos' ability to develop commercially successful products as a result of its current research and development programs, Ikanos' ability to successfully complete its 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 2,  October 3,  January 3,  January 2,  January 3,
                   2011        2010        2010        2011        2010
                ----------  ----------  ----------  ----------  ----------

Revenue         $   37,143  $   41,536  $   58,191  $  191,677  $  130,688
Cost of revenue     20,223      28,575      40,590     126,692      85,019
                ----------  ----------  ----------  ----------  ----------
    Gross profit    16,920      12,961      17,601      64,985      45,669
                ----------  ----------  ----------  ----------  ----------
Operating
 expenses:
  Research and
   development      12,796      14,757      18,061      60,769      49,805
  Selling,
   general and
   administrative    5,294       6,467       9,679      27,239      30,974
  Asset
   impairments           -      21,378           -      21,378       2,460
  Restructuring
   charges             554       3,757         290       5,794       1,338
                ----------  ----------  ----------  ----------  ----------
    Total
     operating
     expenses       18,644      46,359      28,030     115,180      84,577
                ----------  ----------  ----------  ----------  ----------
Loss from
 operations         (1,724)    (33,398)    (10,429)    (50,195)    (38,908)
  Investment
   gain                  -           -       1,238           -       1,238
  Interest
   income, net         (12)          8         124          51         727
                ----------  ----------  ----------  ----------  ----------
Loss before
 income taxes       (1,736)    (33,390)     (9,067)    (50,144)    (36,943)
  Provision
   (benefit) for
   income taxes       (362)       (129)         47        (381)        158
                ----------  ----------  ----------  ----------  ----------
Net loss        $   (1,374) $  (33,261) $   (9,114) $  (49,763) $  (37,101)
                ==========  ==========  ==========  ==========  ==========

Basic and
 diluted net
 loss per share $    (0.02) $    (0.61) $    (0.17) $    (0.88) $    (0.97)
                ==========  ==========  ==========  ==========  ==========
Weighted
 average number
 of shares          63,025      54,904      53,883      56,713      38,098
                ==========  ==========  ==========  ==========  ==========




                        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 2, 2011
                                   ---------------------------------------
                                                 Non-GAAP
                                   As Reported  Adjustments      Non-GAAP
                                   -----------  -----------    -----------
Revenue                            $    37,143  $         -    $    37,143
Cost of revenue                         20,223          (20)(a)     19,703
                                                       (500)(b)
                                                          -
                                   -----------  -----------    -----------
    Gross profit                        16,920         (520)        17,440
                                   -----------  -----------    -----------

Operating expenses:
  Research and development              12,796         (285)(a)     12,511

  Selling, general and
   administrative                        5,294         (235)(a)      4,934
                                                       (125)(b)

  Restructuring charges                    554         (554)(d)          -
                                   -----------  -----------    -----------
    Total operating expenses            18,644       (1,199)        17,445
                                   -----------  -----------    -----------
Loss from operations                    (1,724)       1,719             (5)
  Investment gain                            -            -              -
  Interest income and other, net           (12)           -            (12)
                                   -----------  -----------    -----------
Loss before income taxes                (1,736)       1,719            (17)
Provision (benefit) for income
 taxes                                    (362)           -           (362)
                                   -----------  -----------    -----------
Net income (loss)                  $    (1,374) $     1,719    $       345
                                   ===========  ===========    ===========

Net loss per shares:
    Basic and diluted              $     (0.02)                $      0.01
    Diluted                        $     (0.02)                $      0.01
Weighted average outstanding
 shares:
    Basic                               63,025                      63,025
    Diluted                             63,025                      63,792



                                      Three Months Ended January 3, 2010
                                   ---------------------------------------
                                                  Non-GAAP
                                   As Reported  Adjustments      Non-GAAP
                                   -----------  -----------    -----------
Revenue                            $    58,191  $         -    $    58,191
Cost of revenue                         40,590         (104)(a)     32,693
                                                     (1,803)(b)
                                                     (5,990)(c)
                                   -----------  -----------    -----------
     Gross profit                       17,601       (7,897)        25,498
                                   -----------  -----------    -----------

Operating expenses:
  Research and development              18,061         (947)(a)     17,114

  Selling, general and
   administrative                        9,679         (449)(a)      6,924
                                                     (2,306)(b)

  Restructuring charges                    290         (290)(d)          -
                                   -----------  -----------    -----------
    Total operating expenses            28,030       (3,992)        24,038
                                   -----------  -----------    -----------
Loss from operations                   (10,429)      11,889          1,460
  Investment gain                        1,238       (1,238)(e)          -
  Interest income and other, net           124            -            124
                                   -----------  -----------    -----------
Loss before income taxes                (9,067)      10,651          1,584
Provision (benefit) for income
 taxes                                      47            -             47
                                   -----------  -----------    -----------
Net income (loss)                  $    (9,114) $    10,651    $     1,537
                                   ===========  ===========    ===========
                                                                            
Net loss per shares:
    Basic and diluted              $     (0.17)                $      0.03
    Diluted                        $     (0.17)                $      0.03
Weighted average outstanding
 shares:
    Basic                               53,883                      53,883
    Diluted                             53,883                      56,058


Notes:                                               Three Months Ended
                                                 January 2,     January 3,
                                                    2011           2010
                                                -----------    -----------
  (a)  Stock-based compensation                 $       540    $     1,500
  (b)  Amortization of acquired intangible
        assets                                          625          4,109
  (c)  Fair-value adjustment of
        acquired inventory                                -          5,990
  (d)  Restructuring charges                            554            290
  (e)  Gain of sale of securities                         -         (1,238)
                                                -----------    -----------

       Total non-GAAP adjustments               $     1,719    $    10,651
                                                ===========    ===========




                         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 3, 2010
                                   ---------------------------------------
                                                  Non-GAAP
                                   As Reported  Adjustments      Non-GAAP
                                   -----------  -----------    -----------
Revenue                            $    41,536  $         -    $    41,536
Cost of revenue                         28,575          (24)(a)     26,989
                                                       (910)(b)
                                                       (652)(c)
                                   -----------  -----------    -----------
    Gross profit                        12,961       (1,586)        14,547
                                   -----------  -----------    -----------

Operating expenses:
  Research and development              14,757         (273)(a)     14,484

  Selling, general and
   administrative                        6,467         (168)(a)      5,667
                                                       (632)(b)

  Asset impairments                     21,378      (21,378)(d)          -
  Restructuring charges                  3,757       (3,757)(e)          -
                                   -----------  -----------    -----------
    Total operating expenses            46,359      (26,208)        20,151
                                   -----------  -----------    -----------
Loss from operations                   (33,398)      27,794         (5,604)
  Interest income and other, net             8            -              8
                                   -----------  -----------    -----------
Loss before income taxes               (33,390)      27,794         (5,596)
Benefit for income taxes                  (129)           -           (129)
                                   -----------  -----------    -----------
Net loss                           $   (33,261) $    27,794    $    (5,467)
                                   ===========  ===========    ===========

Basic and diluted net loss per
 share                             $     (0.61)                $     (0.10)

Basic and diluted weighted
 average shares outstanding             54,904                      54,904


Notes:

                                                 October 3,
                                                    2010
                                                -----------
  (a)  Stock-based compensation                 $       465
  (b)  Amortization of acquired intangible
        assets                                        1,542
  (c)  Prepaid royalty write-off                        652
  (d)  Impairments of intangibles and goodwill       21,378
  (e)  Restructuring                                  3,757
                                                -----------
       Total non-GAAP adjustments               $    27,794
                                                ===========




                         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 2, 2011
                                   ---------------------------------------
                                                  Non-GAAP
                                   As Reported  Adjustments      Non-GAAP
                                   -----------  -----------    -----------
Revenue                            $   191,677  $         -    $   191,677
Cost of revenue                        126,692         (106)(a)    120,451
                                                     (3,986)(b)
                                                     (1,497)(c)
                                                       (652)(d)
                                   -----------  -----------    -----------
    Gross profit                        64,985       (6,241)        71,226
                                   -----------  -----------    -----------

Operating expenses:
  Research and development              60,769       (1,684)(a)     59,085


  Selling, general and
   administrative                       27,239       (1,480)(a)     22,252
                                                     (2,527)(b)
                                                       (980)(f)

  Asset impairments                     21,378      (21,378)(g)          -
  Restructuring charges                  5,794       (5,794)(h)          -
                                   -----------  -----------    -----------
    Total operating expenses           115,180      (33,843)        81,337
                                   -----------  -----------    -----------
Loss from operations                   (50,195)      40,084        (10,111)
  Investment gain                            -            -              -
  Interest income and other, net            51            -             51
                                   -----------  -----------    -----------
Loss before income taxes               (50,144)      40,084        (10,060)
Provision (benefit) for income
 taxes                                    (381)           -           (381)
                                   -----------  -----------    -----------
Net loss                           $   (49,763) $    40,084    $    (9,679)
                                   ===========  ===========    ===========

Net loss per shares:
    Basic and diluted              $     (0.88)                $     (0.17)

Weighted average outstanding
 shares:
    Basic and diluted                   56,713                      56,713



                                     Twelve Months Ended January 3, 2010
                                   ---------------------------------------
                                                  Non-GAAP
                                   As 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)(e)

  Selling, general and
   administrative                       30,974       (2,346)(a)     20,707
                                                     (3,932)(b)
                                                     (3,989)(e)

  Asset impairments                      2,460       (2,460)(g)          -
  Restructuring charges                  1,338       (1,338)(h)          -
                                   -----------  -----------    -----------
    Total operating expenses            84,577      (17,776)        66,801
                                   -----------  -----------    -----------
Loss from operations                   (38,908)      29,845         (9,063)
  Investment gain                        1,238       (1,238)(i)          -
  Interest income and other, net           727            -            727
                                   -----------  -----------    -----------
Loss before income taxes               (36,943)      28,607         (8,336)
Provision (benefit) for income
 taxes                                     158            -            158
                                   -----------  -----------    -----------
Net loss                           $   (37,101) $    28,607    $    (8,494)
                                   ===========  ===========    ===========

Net loss per shares:
    Basic and diluted              $     (0.97)                $     (0.22)

Weighted average outstanding
 shares:
    Basic and diluted                   38,098                      38,098


Notes:                                              Twelve Months Ended
                                                 January 2,     January 3,
                                                    2011           2010
                                                -----------    -----------
  (a)  Stock-based compensation                 $     3,270    $     5,920
  (b)  Amortization of acquired intangible
       assets                                         6,513          8,207
  (c)  Fair value adjustment of acquired
        inventory                                     1,497          7,481
  (d)  Prepaid royalty write-off                        652              -
  (e)  Transaction-related expenses                       -          4,439
  (f)  Certain one-time severance                       980              -
  (g)  Impairments of intangibles and
        goodwill                                     21,378          2,460
  (h)  Restructuring charges                          5,794          1,338
  (i)  Investment gain                                    -         (1,238)
                                                -----------    -----------
       Total non-GAAP adjustments               $    40,084    $    28,607
                                                ===========    ===========




                         IKANOS COMMUNICATIONS, INC.
               Unaudited Condensed Consolidated Balance Sheets
                               (In thousands)
                                                     January 2,  January 3,
                                                        2011        2010
                                                     ----------  ----------
                        Assets
Current assets:
  Cash, cash equivalents and short-term investments  $   30,950  $   27,540
  Accounts receivable, net                               24,147      34,995
  Inventory                                              17,046      35,050
  Prepaid expenses and other current assets               2,096       2,155
                                                     ----------  ----------
    Total current assets                                 74,239      99,740
Property and equipment, net                               8,214       7,502
Intangible assets, net                                    6,102      25,359
Goodwill                                                      -       8,633
Other assets                                              1,142       1,766
                                                     ----------  ----------
                                                     $   89,697  $  143,000
                                                     ==========  ==========


         Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                                   $   10,401  $   26,641
  Accrued liabilities                                    13,297      17,050
                                                     ----------  ----------
    Total current liabilities                            23,698      43,691
Other liabilities                                           478       2,193
                                                     ----------  ----------
      Total liabilities                                  24,176      45,884
Stockholders' equity                                     65,521      97,116
                                                     ----------  ----------
                                                     $   89,697  $  143,000
                                                     ==========  ==========

Contact Information

  • Contact:
    Layla McHale
    for Ikanos Communications, Inc.
    +1.408.981.6394
    Email Contact