Exhibit 99.1
Zhone Technologies Reports Fourth Quarter 2007 Financial Results
OAKLAND, Calif.--(BUSINESS WIRE)--Zhone Technologies, Inc. (NASDAQ:ZHNE), a global provider of advanced communications equipment and a leader in VoIP, IPTV, and Ethernet over copper and fiber access lines, today reported its financial results for the fourth quarter ended December 31, 2007.
Revenue for the fourth quarter of 2007 was $46.6 million compared with $41.6 million for the third quarter of 2007 and $44.3 million for the fourth quarter of 2006. Net loss for the fourth quarter of 2007, calculated in accordance with generally accepted accounting principles (“GAAP”), was $1.2 million or $0.01 per share compared with a net loss of $1.5 million or $0.01 per share for the third quarter of 2007, and a net loss of $4.6 million or $0.03 per share for the fourth quarter of 2006. Pro forma earnings before stock-based compensation, gain on sale of patents, interest, taxes, impairment, depreciation and amortization (“EBITDA”) was breakeven for the fourth quarter of 2007, compared to a pro forma EBITDA loss of $4.9 million for the third quarter of 2007, and pro forma EBITDA loss of $2.3 million for the fourth quarter of 2006.
“Our fourth quarter results, highlighted by very strong revenue growth in our international markets, confirm that service providers around the world are adopting our market leading access technologies," said Mory Ejabat, chairman and chief executive officer of Zhone Technologies, Inc. "Our recent divestitures of legacy product lines allow us to focus maximum resources on pure-play access technologies for these emerging global markets.”
Zhone will hold a conference call and audio webcast today, January 31, 2008, at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its fourth quarter 2007 results. This call is open to the public by dialing +1 (800) 706-7741 for U.S. callers and +1 (617) 614-3471 for international callers and then entering passcode 77284281. The audio webcast will be simultaneously available on the Investor Relations section of Zhone's website at http://www.zhone.com/about/investors/.
A replay of the conference call will be available for approximately one week following the original call by dialing +1 (888) 286-8010 for U.S. callers and +1 (617) 801-6888 for international callers and then entering passcode 29612165. An audio webcast replay will also be available online at http://www.zhone.com/about/investors/ for approximately one week following the original call.
Non-GAAP Financial Measures
To supplement Zhone’s consolidated financial statements presented in accordance with GAAP, Zhone uses pro forma EBITDA, a non-GAAP measure Zhone believes is appropriate to enhance an overall understanding of Zhone’s past financial performance and prospects for the future. These adjustments to GAAP results are made with the intent of providing greater transparency to supplemental information used by management in its financial and operational decision-making. These non-GAAP results are among the primary indicators that management uses as a basis for making operating decisions because they provide meaningful supplemental information regarding the company’s operational performance, including the company’s ability to provide cash flows to invest in research and development, and to fund capital expenditures. In addition, these non-GAAP financial measures facilitate management's internal comparisons to the company's historical operating results and comparisons to competitors' operating results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation between net loss calculated on a GAAP basis and pro forma EBITDA on a non-GAAP basis is provided in a table immediately following the Unaudited Condensed Consolidated Statements of Operations.
About Zhone Technologies, Inc.
Zhone Technologies, Inc. (NASDAQ:ZHNE) is a provider of advanced communications equipment to more than 600 operators worldwide. The company’s broad line of access networking solutions enables the full range of multi-play services, including residential and business broadband, VoIP, IPTV, and Ethernet. Zhone’s converged access platform improves network agility and reduces costs, allowing operators to rapidly deploy premium services on their existing copper and fiber infrastructure while providing a seamless migration path to an efficient, all-IP network. www.zhone.com
Zhone, the Zhone logo, and all Zhone product names are trademarks of Zhone Technologies, Inc. Other brand and product names are trademarks of their respective holders. Specifications, products, and/or product names are all subject to change without notice. Copyright © 2008 Zhone Technologies, Inc. All rights reserved.
ZHONE TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share data) | ||||||||||
Three Months Ended | Year Ended | |||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||
2007 | 2007 | 2006 | 2007 | 2006 | ||||||
Net revenue | $ 46,613 | $ 41,604 | $ 44,306 | $ 175,448 | $ 194,344 | |||||
Cost of revenue | 30,493 | 29,066 | 28,214 | 116,074 | 130,857 | |||||
Stock-based compensation | 28 | 67 | 155 | 296 | 892 | |||||
Gross profit | 16,092 | 12,471 | 15,937 | 59,078 | 62,595 | |||||
Operating expenses: | ||||||||||
Research and product development(1) | 7,382 | 8,154 | 8,628 | 32,720 | 36,099 | |||||
Sales and marketing(1) | 8,051 | 8,446 | 8,643 | 33,192 | 38,225 | |||||
General and administrative(1) | 1,643 | 2,260 | 2,968 | 9,511 | 14,036 | |||||
Gain on sale of patents | - | (5,000) | - | (5,000) | - | |||||
Amortization and impairment of intangible assets | - | - | - | - | 116,430 | |||||
Total operating expenses | 17,076 | 13,860 | 20,239 | 70,423 | 204,790 | |||||
Operating loss | (984) | (1,389) | (4,302) | (11,345) | (142,195) | |||||
Other expense, net | (142) | (16) | (248) | (363) | (207) | |||||
Loss before income taxes | (1,126) | (1,405) | (4,550) | (11,708) | (142,402) | |||||
Income tax provision | 106 | 125 | 80 | 394 | 264 | |||||
Net loss | $ (1,232) | $ (1,530) | $ (4,630) | $ (12,102) | $ (142,666) | |||||
Basic and diluted net loss per share | $ (0.01) | $ (0.01) | $ (0.03) | $ (0.08) | $ (0.96) | |||||
Weighted average shares outstanding used to compute basic and diluted net loss per share | 149,907 | 149,715 | 149,142 | 149,623 | 148,727 | |||||
(1) Amounts include stock-based compensation costs as follows: | ||||||||||
Research and product development | 92 | 179 | 333 | 717 | 1,632 | |||||
Sales and marketing | 91 | 154 | 294 | 603 | 1,380 | |||||
General and administrative | 193 | 308 | 498 | 1,250 | 1,601 | |||||
376 | 641 | 1,125 | 2,570 | 4,613 | ||||||
GAAP net loss | $ (1,232) | $ (1,530) | $ (4,630) | $ (12,102) | $ (142,666) | |||||
Stock-based compensation | 404 | 708 | 1,280 | 2,866 | 5,505 | |||||
Interest expense, net | 118 | 38 | 299 | 400 | 446 | |||||
Income taxes | 106 | 125 | 80 | 394 | 264 | |||||
Depreciation | 616 | 716 | 662 | 2,660 | 2,619 | |||||
Gain on sale of patents | - | (5,000) | - | (5,000) | - | |||||
Amortization and impairment of intangible assets | - | - | - | - | 116,430 | |||||
Non-GAAP pro forma EBITDA | $ 12 | $ (4,943) | $ (2,309) | $ (10,782) | $ (17,402) | |||||
Revenue by product line: | ||||||||||
SLMS | 32,079 | 29,227 | 26,174 | 123,184 | 118,209 | |||||
Legacy, service and other | 14,534 | 12,377 | 18,132 | 52,264 | 76,135 | |||||
46,613 | 41,604 | 44,306 | 175,448 | 194,344 |
ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (In thousands) | |||
December 31, | December 31, | ||
2007 | 2006 | ||
Assets | |||
Current assets: | |||
Cash, cash equivalents and short-term investments | $50,165 | $64,310 | |
Accounts receivable | 33,258 | 31,828 | |
Inventories | 44,698 | 45,036 | |
Prepaid expenses and other current assets | 3,804 | 3,852 | |
Total current assets | 131,925 | 145,026 | |
Property and equipment, net | 20,818 | 23,704 | |
Goodwill | 70,401 | 70,737 | |
Restricted cash | 186 | 636 | |
Other assets | 76 | 79 | |
Total assets | $223,406 | $240,182 | |
Liabilities and Stockholders’ Equity | |||
Current liabilities: | |||
Accounts payable | $21,276 | $18,893 | |
Line of credit | 15,000 | 14,500 | |
Current portion of long-term debt | 265 | 7,673 | |
Accrued and other liabilities | 17,888 | 20,088 | |
Total current liabilities | 54,429 | 61,154 | |
Long-term debt, less current portion | 19,140 | 19,376 | |
Other long-term liabilities | 290 | 2,048 | |
Total liabilities | 73,859 | 82,578 | |
Stockholders’ equity: | |||
Common stock | 150 | 149 | |
Additional paid-in capital | 1,061,849 | 1,058,317 | |
Other stockholders’ equity | 610 | 98 | |
Accumulated deficit | (913,062) | (900,960) | |
Total stockholders’ equity | 149,547 | 157,604 | |
Total liabilities and stockholders' equity | $223,406 | $240,182 |
CONTACT:
Zhone Technologies, Inc.
Investors
Susie Choy, +1 510-777-7013
Fax: +1 510-777-7001
Email: investor-relations@zhone.com
or
Public Relations
Tracy Oliver, +1 510-777-7020
Fax: +1 510-777-7001
Email: public-relations@zhone.com