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| [October 30, 2008] |
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BigBand Networks Reports Strong Third Quarter 2008 Results
REDWOOD CITY, Calif. --(Business Wire)-- BigBand Networks, Inc., (NASDAQ:BBND) today reported financial results for the three and nine months ended September 30, 2008.
For the third quarter of 2008, total revenues were $48.3 million, a 25% increase from $38.5 million reported in the third quarter of 2007. Revenues from the Company's video products increased to $46.2 million in the third quarter of 2008, a 51% increase from $30.5 million in the third quarter of 2007.
GAAP net income for the third quarter of 2008 was $3.1 million, or $0.05 per diluted share. These results compare to a GAAP net loss of $12.2 million, or $0.21 per share, reported in the third quarter of 2007.
On a non-GAAP basis, the Company reported net income of $6.5 million, or $0.10 per diluted share, in the third quarter of 2008. These numbers exclude $3.0 million in stock-based compensation expense, $737,000 in restructuring charges and $112,000 in amortization of intangibles, offset by an $18,000 benefit from the sale of CMTS platform inventory previously reserved for in a prior period and $502,000 of incremental income taxes on higher non-GAAP earnings. This compares to a non-GAAP net loss of $2.7 million, or $0.05 per share, in the third quarter of 2007. The previous quarter's non-GAAP results also reflect adjustments for stock-based compensation, amortization of intangibles and related tax expenses. A reconciliation of our GAAP and non-GAAP results is included with this press release.
The Company generated $7.9 million in cash from operating activities, closing the third quarter of 2008 with $165.0 million in cash and investments compared to $158.8 million in the second quarter of 2008. The Company ended the third quarter of 2008 with no debt.
"This was another quarter of solid financial performance, with video revenues increasing by 51% over the year ago period," commented Amir Bassan-Eskenazi, president and CEO of BigBand Networks. "In the quarter, we grew our footprint across all of our solutions - Digital Simulcast, Telco TV and our SDV solutions. Importantly, we have made great progress by achieving key design wins in the large IPTV market, which we expect will contribute to our product and regional diversification strategy in 2009. As we look ahead, we are cautious about the economic environment, but confident in the long-term growth prospects for our business."
Fourth Quarter 2008 Business Outlook
For the fourth quarter of 2008, management provides the following outlook:
-- Net revenues are expected to be in the range of $48.0 to $50.0 million.
-- GAAP gross margins are expected to be in the range of 56% to 58%.
-- Non-GAAP gross margins are expected to be in the range of 57% to 59%
-- GAAP operating expenses are expected to be in the range of $27.5 to $28.0 million.
-- Non-GAAP operating expenses are expected to be in the range of $24.0 to $24.5 million.
-- GAAP net earnings per share are expected to be in the range of $0.02 to $0.04.
-- Our GAAP net earnings per share will reflect a one-time benefit of $0.02 as a result of the sale of our FastFlow provisioning software technology in October 2008. This one-time benefit will be excluded from our non-GAAP net earnings.
-- Non-GAAP net earnings per share are expected to be in the range of $0.04 to $0.06.
The following table presents our non-GAAP anticipated results for the fourth quarter of 2008, reconciled to our GAAP anticipated results. Our non-GAAP anticipated results exclude (i) stock-based compensation expense, (ii) sale of our FastFlow provisioning software technology, (iii) amortization of intangible assets and (iv) related income tax expense.
Fourth quarter 2008
Estimated Earnings per
Share
-------------------------
Low High
------------ ------------
GAAP net income $ 0.02 $ 0.04
Stock-based compensation, net of taxes $ 0.04 $ 0.04
Sale of FastFlow technology net of
amortization of intangibles ($ 0.02) ($ 0.02)
-------------------------
Non-GAAP net income $ 0.04 $ 0.06
=========================
Non-GAAP Financial Measures
BigBand reports all financial information required in accordance with U.S. generally accepted accounting principles (GAAP), but we believe that evaluating our ongoing operating results may be difficult to understand if limited to reviewing only GAAP financial measures. Many of our investors have requested that we disclose non-GAAP information because it is useful in understanding our performance as it excludes non-cash and other one-time charges that many investors feel may obscure our true operating costs. Likewise, management uses non-GAAP measures to manage and assess the profitability of our business going forward and does not consider stock-based compensation expense, amortization of intangible assets or preferred stock warrant expenses, which are non-cash charges, as well as the sale of our FastFlow provisioning software technology and restructuring charges in managing its operations. Specifically, management does not consider these expenses when developing and monitoring our budgets and spending. The economic substance behind our decision to exclude preferred stock warrant expense, stock-based compensation and amortization of intangible assets relates to these charges being non-cash in nature. We exclude restructuring and the sale of our FastFlow provisioning software technology as they are one time events. As a result, we use calculations of non-GAAP operating income, net income, net income per share and gross margin, which exclude, amortization of intangible assets, stock-based compensation, restructuring charges and the related taxes, to evaluate our ongoing operations and to allocate resources within the organization.
As a result, our management believes it is useful, for itself and investors, to review both GAAP information that includes such charges and non-GAAP financial measures that exclude these charges and that it enables such parties to have a better understanding of the overall performance of our ongoing business operations in the periods presented.
Whenever we use a non-GAAP financial measure, we provide a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.
Conference Call Details for October 30, 2008
BigBand Networks will host a corresponding conference call and live webcast at 2:00 p.m. Pacific Daylight Time today. To access the conference call, dial +1-800-257-1836 for the U.S. or Canada and +1-303-262-2137 for international callers. The webcast will be available live on the Investor Relations section of the Company's corporate website at www.bigbandnet.com and via replay beginning approximately two hours after the completion of the call until the Company's announcement of its financial results for the next quarter. An audio replay of the call will also be available to investors beginning at approximately 4:00 p.m. Pacific Daylight Time on Thursday October 30, 2008 until 11:59 p.m. Pacific Standard Time on November 6, 2008, by dialing +1-800-405-2236 or +1-303-590-3000 for callers outside the U.S. and Canada, and entering pass code 11120731#.
Cautionary Statement
The statements in this release regarding achieving key design wins that will contribute to our diversification strategy, being cautious but confident in our long-term growth prospects, our business outlook with respect to the quarter ending December 31, 2008 (including revenues, gross margins, operating expenses, earnings per share, our expansion opportunities in IPTV and international markets in 2009) are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause our actual results to differ materially, including, but not limited to: unexpected fluctuations in our business due to disruption in the global economy, global credit issues, volatility in equity markets, changes in demand for video services, the market acceptance of our products; the fluctuations in our gross margins; the concentration of our customer base; competitive developments including pricing pressures; the timing of recognition of a significant portion of our net revenues given the complex systems integration involved; our ability to manage operating expenses effectively; the level of orders that are received and can be shipped in a given quarter; and the general economic, industry or political conditions in the United States or internationally.
For a detailed discussion of these and other risk factors, please refer to BigBand's Report on Form 10-K for fiscal year 2007 and Report on Form 10-Q for the quarter ended June 30, 2008. You can obtain copies of the reports on the SEC's Web site (www.sec.gov).
Stockholders of BigBand Networks are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. BigBand Networks does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after this October 30, 2008 press release, or to reflect the occurrence of unanticipated events.
About BigBand Networks
BigBand Networks, Inc. (NASDAQ:BBND) provides broadband service providers with innovative network solutions designed to make it easier to move, manage and monetize video. These solutions are based on BigBand's video-networking platforms that are built to enable efficient and reliable delivery of video, voice and data across a wide range of services, including digital TV, high definition TV, addressable advertising, video-on-demand, interactive TV. BigBand Networks' customers include more than 200 service providers--including six of the ten largest service providers in the U.S.--and leading cable and telco service providers in Asia, Europe and Latin America. BigBand Networks is based in Redwood City, CA, with offices worldwide. For additional information about the Company, please call +1.650.995.5000, email info@bigbandnet.com or visit www.bigbandnet.com.
BigBand Networks, Inc.
Condensed Consolidated Balance Sheets
(In thousands, Unaudited)
As of September 30, As of December 31,
2008 2007
------------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 54,698 $ 55,162
Marketable securities 110,274 99,358
------------------- ------------------
Total cash, cash equivalents
and marketable securities 164,972 154,520
Trade receivables, net 16,627 27,855
Inventories, net 7,295 6,832
Prepaid expenses and other
current assets 4,171 4,012
--------------------------------------
Total current assets 193,065 193,219
Property and equipment, net 15,608 17,432
Goodwill and other intangible
assets, net 1,992 2,390
Other non-current assets 6,937 5,545
------------------- ------------------
Total assets $ 217,602 $ 218,586
=================== ==================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 7,812 $ 13,811
Accrued compensation and
related benefits 9,743 6,475
Current portion of deferred
revenues, net 38,703 48,256
Accrued warranty 2,742 3,502
Other current liabilities 6,018 11,879
------------------- ------------------
Total current liabilities 65,018 83,923
Deferred revenues, net, less
current portion 21,555 19,032
Accrued warranty, less current
portion 903 857
Other non-current liabilities 599 -
Accrued long-term severance pay
fund 3,962 3,188
Stockholders' equity:
Common stock 64 62
Additional paid-in capital 260,753 248,139
Deferred stock-based
compensation (34) (203)
Accumulated other comprehensive
(loss) income (1,016) 248
Accumulated deficit (134,202) (136,660)
------------------- ------------------
Total stockholders' equity 125,565 111,586
------------------- ------------------
Total liabilities and
stockholders' equity $ 217,602 $ 218,586
=================== ==================
BigBand Networks, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts, Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
-------- --------- --------- ---------
Net revenues:
Products $38,337 $ 29,942 $104,188 $121,858
Services 9,946 8,608 27,012 23,988
-------- --------- --------- ---------
Total net revenues 48,283 38,550 131,200 145,846
Cost of net revenues:
Products 16,781 21,284 43,459 62,113
Services 2,941 3,569 9,440 10,549
-------- --------- --------- ---------
Total cost of net revenues 19,722 24,853 52,899 72,662
-------- --------- --------- ---------
Gross profit 28,561 13,697 78,301 73,184
-------- --------- --------- ---------
Operating expenses:
Research and development 13,218 12,869 40,430 39,619
Sales and marketing 7,057 9,907 21,923 31,335
General and administrative 5,411 3,668 15,599 11,305
Restructuring charges 737 - 2,230 -
Amortization of intangible
assets 112 143 398 429
-------- --------- --------- ---------
Total operating expenses 26,535 26,587 80,580 82,688
-------- --------- --------- ---------
Operating income (loss) 2,026 (12,890) (2,279) (9,504)
Interest income 1,215 1,874 4,086 4,913
Interest expense - (10) - (619)
Other (expense) income, net (145) (426) 1,302 (5,422)
-------- --------- --------- ---------
Income (loss) before (benefit
from) provision for income
taxes 3,096 (11,452) 3,109 (10,632)
(Benefit from) provision for
income taxes (35) 793 651 935
-------- --------- --------- ---------
Net income (loss) $ 3,131 $(12,245) $ 2,458 $(11,567)
======== ========= ========= =========
Basic net income (loss) per
common share $ 0.05 $ (0.21) $ 0.04 $ (0.26)
======== ========= ========= =========
Diluted net income (loss) per
common share $ 0.05 $ (0.21) $ 0.04 $ (0.26)
======== ========= ========= =========
Shares used in GAAP basic net
income (loss) per common share 64,061 58,821 63,286 45,087
======== ========= ========= =========
Shares used in GAAP diluted net
income (loss) per common share 67,116 58,821 67,208 45,087
======== ========= ========= =========
BigBand Networks, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts, Unaudited)
Three Months Ended September 30, 2008
------------------------------------------------
Stock-based
Comp/Amortization
GAAP of Intangible Realignment Non-GAAP
Results Assets Expenses Results
-------- ------------------ ----------- --------
Net revenues:
Products $38,337 $ - $ - $38,337
Services 9,946 - - 9,946
-------- ------------------ ----------- --------
Total net revenues 48,283 - - 48,283
-------- ------------------ ----------- --------
Cost of net revenues:
Products 16,781 (213) 18 16,586
Services 2,941 (177) - 2,764
-------- ------------------ ----------- --------
Total cost of net
revenues 19,722 (390) 18 19,350
-------- ------------------ ----------- --------
Gross profit 28,561 390 (18) 28,933
-------- ------------------ ----------- --------
Operating expenses:
Research and
development 13,218 (984) - 12,234
Sales and marketing 7,057 (659) - 6,398
General and
administrative 5,411 (1,007) - 4,404
Restructuring
charges 737 - (737) -
Amortization of
intangible assets 112 (112) - -
-------- ------------------ ----------- --------
Total operating
expenses 26,535 (2,762) (737) 23,036
-------- ------------------ ----------- --------
Operating income 2,026 3,152 719 5,897
Interest income 1,215 - - 1,215
Other (expense)
income (145) - - (145)
-------- ------------------ ----------- --------
Income before
(benefit from)
provision for income
taxes 3,096 3,152 719 6,967
(Benefit from)
provision for income
taxes (35) 502 - 467
-------- ------------------ ----------- --------
Net income $ 3,131 $ 2,650 $ 719 $ 6,500
======== ================== =========== ========
Basic net income per
common share $ 0.05 $ 0.10
======== ========
Diluted net income
per common share $ 0.05 $ 0.10
======== ========
Shares used in basic
net income per
common share 64,061 64,061
======== ========
Shares used in
diluted net income
per common share 67,116 67,116
======== ========
BigBand Networks, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts and percentages, Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
-------- --------- --------- ---------
GAAP and Non-GAAP net revenues
as reported $48,283 $ 38,550 $131,200 $145,846
-------- --------- --------- ---------
GAAP cost of net revenues as
reported $19,722 $ 24,853 $ 52,899 $ 72,662
Fixed Assets depreciation
adjustments - (552) - (552)
Inventory write-down relating
to CMTS platform - (5,000) - (5,000)
Inventory recovery relating
to CMTS platform 18 - 773 -
Stock-based compensation
expense (390) (453) (1,279) (1,152)
-------- --------- --------- ---------
Non-GAAP cost of net revenues $19,350 $ 18,848 $ 52,393 $ 65,958
-------- --------- --------- ---------
GAAP gross profit as reported $28,561 $ 13,697 $ 78,301 $ 73,184
Fixed Assets depreciation
adjustments - 552 - 552
Inventory write-down relating
to CMTS platform - 5,000 - 5,000
Inventory recovery relating
to CMTS platform (18) - (773) -
Stock-based compensation
expense 390 453 1,279 1,152
-------- --------- --------- ---------
Non-GAAP gross profit $28,933 $ 19,702 $ 78,807 $ 79,888
-------- --------- --------- ---------
As a percentage of net
revenues:
GAAP gross profit as reported 59.2% 35.5% 59.7% 50.2%
======== ========= ========= =========
Non-GAAP gross profit 59.9% 51.1% 60.1% 54.8%
======== ========= ========= =========
GAAP operating income (loss) as
reported $ 2,026 $(12,890) $ (2,279) $ (9,504)
Fixed Assets depreciation
adjustments - 808 - 808
Inventory write-down relating
to CMTS platform - 5,000 - 5,000
Inventory recovery relating
to CMTS platform (18) - (773) -
Stock-based compensation
expense:
- Cost of net revenues 390 453 1,279 1,152
- Research and development 984 1,103 2,879 2,834
- Sales and marketing 659 1,149 1,907 3,338
- General and
administrative 1,007 456 2,638 1,197
Restructuring charges 737 - 2,230 -
Amortization of intangible
assets 112 143 398 429
-------- --------- --------- ---------
Non-GAAP Operating income
(loss) $ 5,897 $ (3,778) $ 8,279 $ 5,254
-------- --------- --------- ---------
GAAP net income (loss) as
reported $ 3,131 $(12,245) $ 2,458 $(11,567)
Stock-based compensation
expense 3,040 3,161 8,703 8,521
Amortization of intangible
assets 112 143 398 429
Fixed Assets depreciation
adjustments - 808 - 808
Inventory write-down relating
to CMTS platform - 5,000 - 5,000
Inventory recovery relating
to CMTS platform (18) - (773) -
Restructuring charges 737 - 2,230 -
Preferred stock warrant
expense - - - 4,974
Tax effect of adjustments (502) 438 (609) (340)
-------- --------- --------- ---------
Non-GAAP net income (loss) $ 6,500 $ (2,695) $ 12,407 $ 7,825
======== ========= ========= =========
Basic Non-GAAP net income
(loss) per common share $ 0.10 $ (0.05) $ 0.20 $ 0.17
======== ========= ========= =========
Diluted Non-GAAP net income
(loss) per common share $ 0.10 $ (0.05) $ 0.18 $ 0.12
======== ========= ========= =========
Shares used in Basic Non-GAAP
net income (loss) per common
share 64,061 58,821 63,286 45,087
======== ========= ========= =========
Shares used in Diluted Non-GAAP
net income (loss) per common
share 67,116 58,821 67,208 67,372
======== ========= ========= =========
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