NEWPORT BEACH, USA: Conexant Systems Inc. announced that financial results for the first quarter of fiscal 2010 exceeded guidance provided at the beginning of the quarter. In addition, the company said that it delivered core gross margins of 61 percent of revenues, core operating margins of approximately 22 percent of revenues, and core earnings of $0.17 per share. Both margin rates were the highest in company history.
Conexant presents financial results based on Generally Accepted Accounting Principles (GAAP) as well as select non-GAAP financial measures intended to reflect its core results of operations. The company believes these core financial measures provide investors with additional insight into its underlying operating results. Core financial measures exclude certain non-cash and other non-core items as fully described in the GAAP to non-GAAP reconciliation in the accompanying financial data.
For the first quarter of fiscal 2010, Conexant’s revenues were $61.8 million. Core gross margins were 61 percent of revenues. Core operating expenses were $24.2 million, core operating income was $13.5 million, and core net income was $10.0 million, or $0.17 per share.
On a GAAP basis, net revenues for the first quarter of fiscal 2010 were $61.8 million. GAAP gross margins were 61 percent of revenues. GAAP operating expenses were $26.4 million. GAAP net income including discontinued operations was $8.3 million, or $0.14 per diluted share.
The company ended the quarter with $59.1 million in cash and cash equivalents, compared to $125.4 million in the previous quarter. During the first fiscal quarter, the company used approximately $62 million to retire the remainder of its senior secured notes due in November 2010, and $28.7 million to satisfy an expired accounts receivable credit facility.
The company also strengthened its balance sheet during the quarter by exchanging equity for $17.6 million of convertible notes and established a new accounts receivable credit facility in the amount of $15 million.
Financial performance and business perspective
“For the first fiscal quarter, the Conexant team again delivered performance that exceeded our expectations on all financial metrics,” said Scott Mercer, Conexant’s chairman and chief executive officer.
“First fiscal quarter revenues of $61.8 million were better than the $60 million we anticipated entering the quarter and increased 10 percent from fourth fiscal quarter revenues of $56.2 million. First quarter core gross margin of 61 percent was better than the 60 percent we expected and 80 basis points higher than core gross margin of 60.2 percent in the previous quarter.
“Core operating expenses of $24.2 million were lower than the approximately $25 million we anticipated and compared to $25 million in the fourth fiscal quarter. Core operating income of $13.5 million was approximately 22 percent of revenues, was above the approximately $11 million we expected, and compared to $8.8 million in the prior quarter. Core net income was $10 million, or $0.17 per share, rather than the $0.11 per share we anticipated entering the quarter."
“As a percentage of revenue, our first fiscal quarter core gross margin and core operating margin were both the highest in company history,” Mercer said. “With stable core gross margin rates and our continuing focus on controlling core operating expenses, our bottom-line financial performance moving forward will be primarily determined by our ability to increase revenues.
“We plan to grow by capturing market share with existing designs and delivering new products for imaging, audio, embedded modem, and video surveillance applications. In addition, we plan to apply our core capabilities in analog and mixed-signal design and firmware and software development to capitalize on new opportunities in adjacent markets.”
Second fiscal quarter business outlook
Conexant expects revenues for the second quarter of fiscal 2010 to be $60 million to $61 million. Core gross margins are expected to be about 61 percent of revenues. The company anticipates that core operating expenses will be approximately $25 million.
As a result, the company expects that second fiscal quarter core operating income will range between $11.6 million and $12.5 million, with core net income of $0.13 to $0.14 per share based on approximately 66 million shares outstanding.