Proxim Corporation Reports Third Quarter 2004 Financial Results

Proxim Corporation Reports Third Quarter 2004 Financial Results SUNNYVALE, Calif., Oct. 26 /PRNewswire-FirstCall/ -- Proxim Corporation (NASDAQ:PROXD), a global leader in wireless networking equipment for Wi-Fi and broadband wireless, today announced financial results for the third quarter ended October 1, 2004. Revenue for the third quarter of 2004 was $31.5 million, compared to revenue of $31.4 million in the second quarter of 2004, and $35.1 million for the third quarter of 2003. The net loss attributable to common stockholders computed in accordance with generally accepted accounting principles (GAAP) for the third quarter of 2004 was $(4.4) million, or $(0.04) per common share. This compares with a GAAP net loss of $(10.1) million, or $(0.08) per common share, in the preceding second quarter of 2004 and with a GAAP net loss of $(38.2) million, or $(0.31) per common share, in the third quarter of 2003. The non-GAAP, or pro-forma, net loss from operations in the third quarter of 2004 was $(2.7) million, or $(0.02) per common share, compared to pro-forma net loss from operations of $(3.3) million, or $(0.03) per common share, in the second quarter of 2004, and pro-forma loss from operations of $(4.8) million, or $(0.04) per common share, in the third quarter of 2003. A detailed and specific reconciliation of the differences from the pro-forma loss from operations to the GAAP loss is included in the accompanying financial tables. Proxim exited the third quarter of 2004 with $19.1 million in cash, cash equivalents and restricted cash. This compares to $12.2 million in cash, cash equivalents, and restricted cash at the end of the second quarter of 2004, which excluded $2.5 million in short-term investments. Key product highlights for the third quarter of 2004, include the following: -- Illustrating Proxim's competitive strength in broadband wireless access, Proxim Tsunami MP.11 sales were up 46 percent sequentially. This product family is rapidly becoming one of the company's largest revenue producers. This success reflects the growing market for solutions that enable WiMAX applications, such as public safety, security and surveillance, last mile access and metropolitan area networking. -- Proxim experienced strong growth in its enterprise wireless point-to-point business. Sales of its Tsunami QuickBridge family, which delivers low-cost, high-capacity wireless LAN extension and dedicated voice and data point-to-point connectivity, grew 41 percent sequentially. -- Proxim is successfully transitioning from legacy LAN products to its next-generation Wi-Fi platforms, which address market requirements for advanced security and voice support, including seamless handoff to cellular networks. The Proxim ORiNOCO AP-4000 access point product grew 44 percent from the second quarter of 2004 to the third quarter of 2004. -- Sales of Proxim's Lynx digital radios for cellular backhaul fell short of expectations, due to reduced carrier spending and consolidation. "This past quarter reflected continued improvements in gross margin and cash management, as well as the completion of a capital structure simplification initiative and the settlement of patent disputes with Symbol," said Frank Plastina, Chairman and Chief Executive Officer at Proxim. "These significant accomplishments provide Proxim with a unique ability to address the rapidly evolving demand for Wi-Fi and WiMax technology." Conference Call Information Proxim will host a conference call to review the company's third quarter 2004 financial results. Today's call begins at 5:00 p.m. Eastern/2:00 p.m. Pacific Time. Dial-In Information To listen to the conference call via telephone, dial 719-457-2696 at least five minutes prior to the scheduled start time. Webcast Information To listen to the webcast, go to http://www.proxim.com/, and click on the link titled "Proxim Announces Third Quarter 2004 Results Call." The minimum requirements to listen include sound capabilities on your personal computer and installation of RealPlayer software available at no cost for Windows XP/ME/2000, Windows 95/98, Windows 3.1, Windows NT, Macintosh, and UNIX systems from Real Networks Inc. http://www.real.com/. The call will be archived immediately following the conference call and will remain available at http://investor.proxim.com/ . Additionally, the conference call will be available on a recorded telephone archive by calling toll free 888-203-1112 and entering pass code 925453, beginning Tuesday, October 26, 2004 at 8:00 p.m., Eastern Time until midnight Eastern Time on Wednesday, November 3, 2004. For international callers, the recorded telephone archive is available by calling the following toll number: 719-457-0820 and entering pass code 925453. About Proxim Proxim(R) Corporation is a global leader in wireless networking equipment for Wi-Fi and broadband wireless networks. The company provides enterprise and service provider customers with wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. Product families include the Award-winning ORiNOCO Wi-Fi products, Tsunami Ethernet bridges, and Lynx point-to-point digital radios. Proxim is a principal member of the WiMAX Forum(TM) and a member of the Wi-Fi(R) Alliance. The company is publicly traded on the Nasdaq under the symbol PROXD and is on the Web at http://www.proxim.com/. Safe Harbor This press release may contain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements about expected growth in the markets for and expected sales of Proxim's products, contribution to revenue by product family, the effects of the Company's capital simplification plan and settlement of litigation with Symbol and Proxim's ability to address market opportunities are subject to risks and uncertainties that could cause actual results to differ materially from Proxim's expectations in these statements. For additional information regarding risks relating to Proxim's business, see Proxim Corporation's Form 10-K for the year ended December 31, 2003 and Forms 10-Q for the quarters ended April 2, 2004 and July 2, 2004, Current Reports on Form 8-K, and other relevant materials filed by Proxim with the Securities and Exchange Commission. Proxim assumes no obligation and does not intend to update these forward-looking statements. Proxim Corporation Condensed Consolidated Balance Sheets (in thousands) (Unaudited) October 1, December 31, Assets 2004 2003 Current assets: Cash and cash equivalents $18,313 $19,756 Accounts receivable, net 8,859 13,961 Inventory 15,804 19,939 Other current assets 4,803 5,301 Total current assets 47,779 58,957 Property and equipment, net 6,078 7,522 Goodwill and other intangible assets, net 35,381 50,059 Restricted cash 770 1,254 Other assets 432 2,316 Total assets $90,440 $120,108 Liabilities, Mandatorily Redeemable Convertible Preferred Stock and Stockholders' Deficit Current liabilities: Accounts payable $7,932 $10,500 Capital lease obligations, current 1,144 1,176 Accrued royalties and interest 9,523 26,906 Other accrued liabilities 20,328 20,804 Convertible bridge loan 10,000 -- Convertible promissory notes -- 34,735 Total current liabilities 48,927 94,121 Capital lease obligations, long-term 116 934 Accrued royalties, long-term 8,805 -- Long-term debt 101 101 Restructuring accruals, long-term 7,823 8,660 Common stock warrants 5,500 21,800 Total liabilities 71,272 125,616 Series A mandatorily redeemable convertible preferred stock 80,749 73,580 Series B mandatorily redeemable convertible preferred stock 49,703 -- Total mandatorily redeemable convertible preferred stock 130,452 73,580 Stockholders' deficit: Capital stock 319,170 319,376 Accumulated deficit (429,743) (397,753) Notes receivable from stockholders (711) (711) Total stockholders' deficit (111,284) (79,088) Liabilities, mandatorily redeemable convertible preferred stock and stockholders' deficit $90,440 $120,108 Proxim Corporation Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended Oct. 1, Sept. 26, Oct. 1, Sept. 26, 2004 2003 2004 2003 Product revenue, net $31,526 $35,058 $89,640 $103,892 License revenue -- -- -- 6,000 Total revenue, net 31,526 35,058 89,640 109,892 Cost of revenue 19,275 22,041 56,792 64,670 Royalty charges (benefit) (4,796) 22,869 (3,179) 22,869 Restructuring provision for excess and obsolete inventory -- -- -- 22,549 Gross profit (loss) 17,047 (9,852) 36,027 (196) Operating expenses: Research and development 4,748 4,915 14,160 19,032 Selling, general and administrative 11,497 13,179 34,096 37,720 Legal expense for certain litigation 105 1,700 1,050 5,700 Amortization of intangible assets 3,948 5,364 14,676 16,229 Bad debt expense -- 2,305 -- 2,305 Restructuring charges (benefit) -- (5,194) 2,029 7,298 Loss from operations (3,251) (32,121) (29,984) (88,480) Interest and other income (expense), net 1,949 (4,434) 4,227 (4,527) Loss before income taxes (1,302) (36,555) (25,757) (93,007) Income tax provision 203 -- -- -- Net loss (1,505) (36,555) (25,757) (93,007) Accretion of Series A preferred stock obligations (1,725) (1,596) (5,070) (4,681) Accretion of Series B preferred stock obligations (1,164) -- (1,164) -- Net loss attributable to common stockholders - basic and diluted $(4,394) $(38,151) $(31,991) $(97,688) Net loss per share - basic and diluted $(0.04) $(0.31) $(0.26) $(0.81) Weighted average common shares 123,487 121,985 123,358 121,324 As a percentage of revenue: Gross margin 54.1% -28.1% 40.2% -0.2% Research and development expense 15.1% 14.0% 15.8% 17.3% Selling, general and administrative expense 36.5% 37.6% 38.0% 34.3% Proxim Corporation Pro Forma Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended Oct. 1, Sept. 26, Oct. 1, Sept.26, 2004 2003 2004 2003 Product revenue, net $31,526 $35,058 $89,640 $103,892 License revenue -- -- -- 6,000 Total revenue, net 31,526 35,058 89,640 109,892 Cost of revenue 19,275 22,041 56,792 64,670 Gross profit 12,251 13,017 32,848 45,222 Operating expenses: Research and development 4,748 4,915 14,160 19,032 Selling, general and administrative 11,497 13,179 34,096 37,720 Legal expense for certain litigation 105 1,700 1,050 5,700 Loss from operations (4,099) (6,777) (16,458) (17,230) Interest and other expense, net (4) (1,484) (533) (1,577) Loss before income taxes (4,103) (8,261) (16,991) (18,807) Income tax benefit (1,436) (3,418) (5,947) (6,582) Net loss $(2,667) $(4,843) $(11,044) $(12,225) Net loss per share - basic and diluted $(0.02) $(0.04) $(0.09) $(0.10) Weighted average common shares 123,487 121,985 123,358 121,324 As a percentage of revenue: Gross margin 38.9% 37.1% 36.6% 41.2% Research and development expense 15.1% 14.0% 15.8% 17.3% Selling, general and administrative expense 36.5% 37.6% 38.0% 34.3% Proxim Corporation GAAP to Pro Forma Net Loss Reconciliation (in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended Oct. 1, Sept. 26, Oct. 1, Sept. 26, 2004 2003 2004 2003 GAAP net loss $(4,394) $(38,151) $(31,991) $(97,688) Royalty charges (benefit) and interest (8,029) 25,819 (6,197) 25,819 Restructuring provision for excess and obsolete inventory -- -- -- 22,549 Amortization of intangible assets 3,948 5,364 14,676 16,229 Bad debt expense -- 2,305 -- 2,305 Restructuring charges (benefit) -- (5,194) 2,029 7,298 Interest on convertible promissory notes 1,331 -- 7,517 -- Amortization of debt discount and issuance costs 1,870 -- 6,462 -- Interest on convertible bridge loan 271 -- 271 -- Revaluation of common stock warrants (2,500) -- (16,300) -- Accretion of Series A preferred stock obligations 1,725 1,596 5,070 4,681 Accretion of Series B preferred stock obligations 1,164 -- 1,164 -- Loss on sale of investment 308 -- 308 -- Income tax benefit 1,639 3,418 5,947 6,582 Pro forma net loss $(2,667) $(4,843) $(11,044) $(12,225) Use of Pro Forma Financial Information To supplement our consolidated financial statements presented on a GAAP basis, Proxim uses non-GAAP, or pro forma, measures of operating results, net income/loss and income/loss per share, which are adjusted to exclude certain costs, expenses, gains and losses that we believe are useful to enhance the overall understanding of our financial performance. These adjustments to our GAAP results are made with the intent of providing both management and investors a supplemental understanding of Proxim's underlying operational results and trends. Adjusted pro forma results are among the primary indicators management uses as a basis for planning and forecasting our business. The presentation of this additional information is not meant to be considered in isolation or as a substitute for Proxim's financial results prepared in accordance with generally accepted accounting principles in the United States of America. DATASOURCE: Proxim Corporation CONTACT: Ben Gibson, Vice President, Corporate Marketing, +1-408-542-5200, or Michael Angel, Chief Financial Officer, +1-408-542-5200, both of Proxim Corporation Web site: http://www.proxim.com/