AUSTIN, Texas--(BUSINESS WIRE)--Entorian Technologies Inc. (OTC MARKETS: ENTN), a leader in rugged, mission-critical mobile computing solutions for use in harsh, demanding environments, today announced financial results for the second quarter ended June 30, 2012.
Second Quarter Summary:
- Second quarter revenue of $12.6 million
- Second quarter non-GAAP operating income of $0.5 million
- Second quarter GAAP operating income of $0.1 million
- Non-GAAP net income of $0.5 million, or $0.12 per share (excludes non-cash charges for stock-based compensation and amortization of acquisition intangibles)
- GAAP net income of $0.1 million, or $0.03 per share
- Cash and cash equivalents increased to $22.3 million from $18.5 million at March 31, 2012
Management Commentary
Stephan Godevais, Entorian’s president and CEO, stated, “We continued to strengthen our balance sheet during the second quarter as we benefitted from our efforts to align costs and expenses with the market slowdown. In addition, our focus on inventory control initiatives contributed to a net cash increase of $3.8 million. Second quarter revenue increased 27 percent sequentially, and we continue to receive positive feedback from end-users on our last generation products.”
Second Quarter 2012 Financial Results
Total revenue for the second quarter of 2012 was $12.6 million, consisting of $12.2 million of product revenue associated with the company’s rugged technology solutions and $0.4 million in memory license revenue. This compares to total revenue of $9.9 million in the first quarter, which consisted of $9.4 million of rugged technology product revenue and $0.5 million in memory license revenue.
In accordance with GAAP, gross profit for the second quarter of 2012 was $2.2 million, or 17.8 percent of revenue, compared to a gross profit of $2.0 million, or 20.2 percent, in the previous quarter. On a non-GAAP basis, gross profit was $2.5 million, or 19.6 percent of revenue in the second quarter of 2012, compared to $2.2 million, or 22.5 percent in the previous quarter.
On a GAAP basis, total operating expenses in the second quarter of 2012 were $2.1 million, compared to $2.0 million in the previous quarter. On a non-GAAP basis, total operating expenses for the second quarter of 2012 were $2.0 million, compared to $1.9 million in the previous quarter.
Operating income for the second quarter 2012 was $0.1 million, compared to an operating loss of $36,000 in the previous quarter. On a non-GAAP basis, second quarter operating income was $0.5 million as compared to operating income of $0.3 million in the prior quarter.
Second quarter 2012 GAAP net income was $0.1 million, or $0.03 per share, compared to a net income in the previous quarter of $20,000, or $0.01 per share.
Excluding non-cash charges for stock-based compensation of $0.1 million and amortization of acquisition intangibles totaling $0.2 million, non-GAAP net income for the second quarter was $0.5 million, or $0.12 per share, compared to the non-GAAP net income of $0.4 million, or $0.09 per share, in the previous quarter. A reconciliation of GAAP results to non-GAAP results has been provided in the financial statement tables following the text of this press release.
As of June 30, 2012, cash and cash equivalents were $22.3 million, compared to $18.5 million on March 31, 2012. Inventory as of June 30, 2012 was $5.9 million, compared to $6.9 million on March 31, 2012.
Business Outlook
“We are very pleased by the market response to our ruggedized products as we continue to gain traction with customers. We believe we are well positioned to capitalize on long-term growth in this market but remain cautious in the near-term as the timing of government spending is difficult to predict. We also believe there are additional opportunities for our rugged technologies in other end markets as the benefits of ruggedization and longer-lasting rugged devices, such as convertibles and notebooks, are more broadly recognized. We continue to explore these and other opportunities, while simultaneously maintaining prudent cost management,” concluded Mr. Godevais.
Cautionary Language
This press release contains forward-looking statements. These statements are generally accompanied by words such as “expect,” “believe,” and similar expressions. These statements include opportunities for growth in the future. We do not have sufficient backlog to rely upon when forecasting results, so our future performance is very difficult to predict. Our forward-looking statements are based on our current expectations, estimates and assumptions and are subject to many risks, uncertainties and unknown future events that could cause actual results to differ materially. Risks and uncertainties that may cause future results to differ include, but are not limited to, the risk of a change in our relationship with our OEM customer; a change in the efforts by our OEM customer to sell our rugged computing products; the timing and volume of sales of our products by our OEM customer; a shortage of critical parts, which could negatively impact our ability to fulfill orders; fluctuating demand for, and life cycles of, our products; inconsistency in forecasts provided to us by our largest customer, resulting in increased inventory exposure; operational risks from our reliance on suppliers, subcontractors and third-party manufacturers for the production of ruggedized products; risks related to product liability and warranty claims in the event our products do not function according to specification or include defective parts; the risk that broker-dealers may not make a market in our securities; a failure by us to develop new products that are successfully qualified and utilized by customers; our ability to manufacture and ship products within a particular reporting period; the risk that foreign or domestic manufacturers develop products that compete successfully with our own on cost or other functionality; our ability to enforce our intellectual property rights or to defend claims that we infringe the intellectual property rights of others, and the significant costs to us of related litigation; the risk that our average selling prices decline during the period more than we expect because of competitive pressures, substituted products or overall reduced demand for our products; risks associated with budget constraints of federal, state and local governments that could negatively impact sales of our ruggedized products; risks associated with the failure of our ruggedized products to meet military specifications MIL-STD-810; the risks of seasonality, to which we are subject; and the risks associated with our dependence on a few key personnel to manage our business effectively.
For a discussion of these and other factors that could impact our financial results and cause actual results to differ materially from those in the forward-looking statements, please refer to our annual report and most recent filings with the OTC Markets Group Inc. The foregoing information concerning our business outlook represents our outlook as of the date of this news release, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.
Non-GAAP Financial Measurements
In addition to the GAAP results provided by this document, the company has provided non-GAAP financial measurements that present net income, operating income, operating loss, operating expense, gross profit, gross margin and earnings per diluted share on a basis excluding non-cash charges for stock-based compensation and amortization of acquisition intangibles. Details of these excluded items are presented in one of the tables below, which reconcile the GAAP results to non-GAAP financial measurements described in this press release. Entorian has chosen to provide non-GAAP financial measurements to investors because it believes that excluding certain charges represents a better basis for the comparison of its current results to the results of its peer companies. In addition, the company believes that it provides a means to highlight the results of core ongoing operations to investors. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP.
About Entorian Technologies
Entorian Technologies Inc. (OTC MARKETS: ENTN) is a leader in rugged, mission-critical mobile and server computing solutions for use in harsh, demanding environments through its subsidiary, Augmentix Corporation. Its Augmentix-produced servers and mobile products combine best-in-class technologies and standardized components from industry leader Dell, with proven ruggedization methods from Augmentix. These rugged systems are environmentally robust and technologically advanced. For more information, go to www.entorian.com and www.augmentix.com.
Entorian is a trademark of Entorian Technologies Inc. and Augmentix is a trademark of Augmentix Corporation.
| ENTORIAN TECHNOLOGIES INC. | ||||||||||||||
| CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||
| (in thousands, except per share data; unaudited) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| June 30, | March 31, | June 30, | ||||||||||||
| 2012 | 2012 | 2011 | ||||||||||||
| Revenue: | ||||||||||||||
| Product | $ | 12,169 | $ | 9,425 | $ | 16,376 | ||||||||
| License | 398 | 449 | 633 | |||||||||||
| Total revenue | 12,567 | 9,874 | 17,009 | |||||||||||
| Cost of revenue: | ||||||||||||||
| Product (1) | 10,119 | 7,665 | 14,683 | |||||||||||
| Amortization of acquisition intangibles | 213 | 214 | 651 | |||||||||||
| Total cost of revenue | 10,332 | 7,879 | 15,334 | |||||||||||
| Gross profit | 2,235 | 1,995 | 1,675 | |||||||||||
| Operating expenses: | ||||||||||||||
| Selling, general and administrative (1) | 1,133 | 1,120 | 1,127 | |||||||||||
| Research and development (1) | 966 | 911 | 1,487 | |||||||||||
| Total operating expenses | 2,099 | 2,031 | 2,614 | |||||||||||
| Income (loss) from operations | 136 | (36 | ) | (939 | ) | |||||||||
| Other income (expense): | ||||||||||||||
| Interest income | 5 | 61 | 52 | |||||||||||
| Interest expense | (1 | ) | (1 | ) | (8 | ) | ||||||||
| Other, net | - | 2 | - | |||||||||||
| Total other income, net | 4 | 62 | 44 | |||||||||||
| Income (loss) before income taxes | 140 | 26 | (895 | ) | ||||||||||
| Provision (benefit) for income taxes | 6 | 6 | (87 | ) | ||||||||||
| Net income (loss) | $ | 134 | $ | 20 | $ | (808 | ) | |||||||
| Income (loss) per share: | ||||||||||||||
| Basic | $ | 0.03 | $ | 0.01 | $ | (0.21 | ) | |||||||
| Diluted | $ | 0.03 | $ | 0.01 | $ | (0.21 | ) | |||||||
| Shares used in computing income (loss) per share: | ||||||||||||||
| Basic | 3,880 | 3,880 | 3,877 | |||||||||||
| Diluted | 3,936 | 3,881 | 3,877 | |||||||||||
| (1) Includes stock-based compensation expense as follows: | ||||||||||||||
| Cost of revenue | $ | 9 | $ | 10 | $ | 9 | ||||||||
| Selling, general and administrative expense | 82 | 98 | 131 | |||||||||||
| Research and development expense | 17 | 17 | 38 | |||||||||||
| $ | 108 | $ | 125 | $ | 178 | |||||||||
| ENTORIAN TECHNOLOGIES INC. | |||||||||
| CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | |||||||||
| (in thousands, except per share data; unaudited) | |||||||||
| Six Months Ended | |||||||||
| June 30, | June 30, | ||||||||
| 2012 | 2011 | ||||||||
| Revenue: | |||||||||
| Product | $ | 21,594 | $ | 35,134 | |||||
| License | 847 | 1,286 | |||||||
| Total revenue | 22,441 | 36,420 | |||||||
| Cost of revenue: | |||||||||
| Product (1) | 17,784 | 30,636 | |||||||
| Amortization of acquisition intangibles | 427 | 1,340 | |||||||
| Total cost of revenue | 18,211 | 31,976 | |||||||
| Gross profit | 4,230 | 4,444 | |||||||
| Operating expenses: | |||||||||
| Selling, general and administrative (1) | 2,253 | 2,329 | |||||||
| Research and development (1) | 1,877 | 3,327 | |||||||
| Total operating expenses | 4,130 | 5,656 | |||||||
| Income (loss) from operations | 100 | (1,212 | ) | ||||||
| Other income (expense): | |||||||||
| Interest income | 66 | 58 | |||||||
| Interest expense | (2 | ) | (9 | ) | |||||
| Other, net | 2 | 7 | |||||||
| Total other income, net | 66 | 56 | |||||||
| Income (loss) before income taxes | 166 | (1,156 | ) | ||||||
| Provision (benefit) for income taxes | 12 | (89 | ) | ||||||
| Net income (loss) | $ | 154 | $ | (1,067 | ) | ||||
| Income (loss) per share: | |||||||||
| Basic | $ | 0.04 | $ | (0.28 | ) | ||||
| Diluted | $ | 0.04 | $ | (0.28 | ) | ||||
| Shares used in computing income (loss) per share: | |||||||||
| Basic | 3,880 | 3,876 | |||||||
| Diluted | 3,899 | 3,876 | |||||||
| (1) Includes stock-based compensation expense as follows: | |||||||||
| Cost of revenue | $ | 19 | $ | 20 | |||||
| Selling, general and administrative expense | 180 | 268 | |||||||
| Research and development expense | 34 | 73 | |||||||
| $ | 233 | $ | 361 | ||||||
| ENTORIAN TECHNOLOGIES INC. | |||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | |||||||||||||
| (in thousands, except per share data; unaudited) | |||||||||||||
| Three Months Ended | |||||||||||||
| June 30, | March 31, | June 30, | |||||||||||
| 2012 | 2012 | 2011 | |||||||||||
| GAAP income (loss) from operations | $ | 136 | $ | (36 | ) | $ | (939 | ) | |||||
| Non-GAAP adjustments: | |||||||||||||
| Amortization of acquisition intangibles | 213 | 214 | 651 | ||||||||||
| Stock-based compensation expense | 108 | 125 | 178 | ||||||||||
| Total non-GAAP adjustments | 321 | 339 | 829 | ||||||||||
| Non-GAAP income (loss) from operations | $ | 457 | $ | 303 | $ | (110 | ) | ||||||
| GAAP net income (loss) | $ | 134 | $ | 20 | $ | (808 | ) | ||||||
| Total non-GAAP adjustments affecting income from operations | 321 | 339 | 829 | ||||||||||
| Non-GAAP net income | $ | 455 | $ | 359 | $ | 21 | |||||||
| Shares used in calculating non-GAAP diluted income per share | 3,936 | 3,881 | 4,155 | ||||||||||
| Non-GAAP diluted income per share | $ | 0.12 | $ | 0.09 | $ | 0.01 | |||||||
| ENTORIAN TECHNOLOGIES INC. | ||||||||
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | ||||||||
| (in thousands, except per share data; unaudited) | ||||||||
| Six Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2012 | 2011 | |||||||
| GAAP income (loss) from operations | $ | 100 | $ | (1,212 | ) | |||
| Non-GAAP adjustments: | ||||||||
| Amortization of acquisition intangibles | 427 | 1,340 | ||||||
| Stock-based compensation expense | 233 | 361 | ||||||
| Total non-GAAP adjustments | 660 | 1,701 | ||||||
| Non-GAAP income from operations | $ | 760 | $ | 489 | ||||
| GAAP net income (loss) | $ | 154 | $ | (1,067 | ) | |||
| Total non-GAAP adjustments affecting income from operations | 660 | 1,701 | ||||||
| Non-GAAP net income | $ | 814 | $ | 634 | ||||
| Shares used in calculating non-GAAP diluted income per share | 3,899 | 4,152 | ||||||
| Non-GAAP diluted income per share | $ | 0.21 | $ | 0.15 | ||||
| ENTORIAN TECHNOLOGIES INC. | |||||||||
| CONSOLIDATED CONDENSED BALANCE SHEETS | |||||||||
| (in thousands) | |||||||||
| June 30, | Dec. 31, | ||||||||
| 2012 | 2011 | ||||||||
| (unaudited) | |||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 22,271 | $ | 16,595 | |||||
| Accounts receivable, net of allowance of $0 in 2012 and $4 in 2011 | 2,418 | 6,946 | |||||||
| Inventories | 5,930 | 8,295 | |||||||
| Income tax receivable | - | 812 | |||||||
| Deferred tax asset | 76 | 76 | |||||||
| Prepaid expenses and other current assets | 1,578 | 1,305 | |||||||
| Total current assets | 32,273 | 34,029 | |||||||
| Property and equipment, net | 899 | 1,168 | |||||||
| Other intangibles, net | 1,896 | 2,346 | |||||||
| Other assets | 151 | 173 | |||||||
| Total assets | $ | 35,219 | $ | 37,716 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 3,621 | $ | 6,652 | |||||
| Accrued compensation | 186 | 60 | |||||||
| Accrued liabilities | 2,074 | 1,967 | |||||||
| Total current liabilities | 5,881 | 8,679 | |||||||
| Other accrued liabilities | 800 | 886 | |||||||
| Deferred tax liabilities | 76 | 76 | |||||||
| Stockholders' equity: | |||||||||
| Capital stock | 152,367 | 152,134 | |||||||
| Treasury stock | (26,049 | ) | (26,049 | ) | |||||
| Accumulated deficit | (97,856 | ) | (98,010 | ) | |||||
| Total stockholders' equity | 28,462 | 28,075 | |||||||
| Total liabilities and stockholders' equity | $ | 35,219 | $ | 37,716 | |||||
| ENTORIAN TECHNOLOGIES INC. | ||||||||||||||
| RECONCILIATION OF ADDITIONAL GAAP TO NON-GAAP FINANCIAL MEASURES | ||||||||||||||
| (in thousands; unaudited) | ||||||||||||||
| Quarter Ended | ||||||||||||||
| June 30, | March 31, | June 30, | ||||||||||||
| 2012 | 2012 | 2011 | ||||||||||||
| Gross profit | $ | 2,235 | $ | 1,995 | $ | 1,675 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||
| Amortization of acquisition intangibles | 213 | 214 | 651 | |||||||||||
| Stock-based compensation | 9 | 10 | 9 | |||||||||||
| Non-GAAP gross profit | $ | 2,457 | $ | 2,219 | $ | 2,335 | ||||||||
| Total revenue | $ | 12,567 | $ | 9,874 | $ | 17,009 | ||||||||
| Non-GAAP gross margin percentage | 19.6 | % | 22.5 | % | 13.7 | % | ||||||||
| Operating expenses | $ | 2,099 | $ | 2,031 | $ | 2,614 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||
| Stock-based compensation | 99 | 115 | 169 | |||||||||||
| Non-GAAP operating expenses | $ | 2,000 | $ | 1,916 | $ | 2,445 | ||||||||
| Selling, general and administrative expense | $ | 1,133 | $ | 1,120 | $ | 1,127 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||
| Stock-based compensation | 82 | 98 | 131 | |||||||||||
| Non-GAAP selling, general and administrative expense | $ | 1,051 | $ | 1,022 | $ | 996 | ||||||||
| Non-GAAP SG&A as a percentage of total revenue | 8.4 | % | 10.4 | % | 5.9 | % | ||||||||
| Research and development expense | $ | 966 | $ | 911 | $ | 1,487 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||
| Stock-based compensation | 17 | 17 | 38 | |||||||||||
| Non-GAAP research and development expense | $ | 949 | $ | 894 | $ | 1,449 | ||||||||
| Non-GAAP R&D as a percentage of total revenue | 7.6 | % | 9.1 | % | 8.5 | % | ||||||||