Powerwave Technologies, Inc. (

PWAV

)

Q1 2011 Earnings Call

May 05, 2011 5 pm ET

Executives

Tom Spaeth - VP

Kevin Michaels - CFO

Ron Buschur - President & CEO

Analysts

Mike Walkley - Canaccord Genuity

Amir Rozwadowski - Barclays Capital

Scott Searle - Powerwave

Larry Harris - CL King

Ted Moreau - WJB Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Q1 2011 Powerwave Technologies Incorporated Earnings Conference Call. (Operator Instructions)

I would now like to turn the call over today to Tom Spaeth, VP Treasurer.

Tom Spaeth

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Good afternoon and welcome to Powerwave Technologies first quarter 2011 financial results conference call. I am Tom Spaeth, Powerwave's Treasurer. Joining us on today's call will be Ron Buschur, President and Chief Executive Officer; and Kevin Michaels, Chief Financial Officer.

Before starting, I would like to point out that various remarks we make about future expectations, plans and prospects for Powerwave, including but not limited to anticipated revenues and revenue growth rates, the split between operator OEM sales, operating margins, gross profit margins, earnings per share levels, cash flow projections, revenue composition, supply chain constraints and shortages, manufacturing levels, improvements in cost structure, cost savings related to our facility consolidations, future cost savings related to our cost reduction activities, demand levels for the company's product lines, projected growth in market share, trends in the wireless infrastructure market, the timing of product deliveries and future orders, the company's ability to enter into and compete in vertical markets for its products such as Government and Defense markets, common stock prices, the company's ability to resolve new product production issues, debt purchases, the success of new products, expense levels, capital expenditure rates, inventory turns, tax rates, day sales outstanding and the company's ability to pay off its convertible debt are all forward-looking statements.

These statements are subject to numerous risks and uncertainties that could cause Powerwave's actual results to be materially different from those projected or implied. Some of the risks and uncertainties include our ability to accurately forecast and anticipate customer orders, our ability to obtain material components within expected lead times, realize anticipated cost savings and synergies, the negative impact on demand for our products due to the macroeconomic environment, reduced demand due to industry consolidation among our major customers, fluctuations in foreign currencies, the ability to accurately forecast cash flows and credit collections, the ability to enter into new markets for our products and solutions, the impact of competitive products and pricing, economic and political conditions and the loss of one or more significant customer accounts.

Please refer to our press release, Powerwave's current Form 10-K for the fiscal year ended January 2, 2011 and other filings which are on file with the Securities and Exchange Commission for additional information on factors which could cause our actual results to be different from those projected or implied.

In addition, on this call we'll discuss non-GAAP financial information. A reconciliation of the non-GAAP financial information to our financial statements as prepared under GAAP is included in our press release dated today, which can be found at our website at powerwave.com and on Business Wire.

The press release also has detailed information concerning several of the significant items impacting our results and we urge you to review that information.

Now, I'm going to turn the call over to Kevin Michaels, Powerwave's Chief Financial Officer.

Kevin Michaels

Thank you, Tom and good afternoon everyone. With all these risk factors in mind, I would like to start by reviewing our financial results, which are also summarized in our press release.

Net sales for the first quarter of 2011 were $136.6 million and we reported a GAAP net loss of $7 million, which equates to a basic loss per share of $0.04. This includes 700,000 of non-cash debt discount amortization expense related to certain of our outstanding convertible notes, and $2 million of non-cash pre-tax stock based compensation expense in the quarter.

All of these charges and amortization totaled approximately $2.8 million for the first quarter.

On a pro forma basis, excluding the restructuring and impairment charges, the debt-related charges and the stock based compensation expenses for the quarter, we generated breakeven operating income and a pro forma net loss of $1.6 million which equates to a pro forma net loss of $0.01 per share.

Over the first quarter, our revenues were impacted by several factors, including a slow ramp-up of demand in the beginning of the year. As many of you know, the first quarter is usually the slowest quarter of the year, as operators finalize their operating plans and weather also takes a toll. In addition, we were impacted by production delays we encountered while ramping up one of our new LTE products.

We believe that these delays impacted our revenue for the first quarter by approximately $8 million. Toward the end of the quarter we have improved the manufacturability of this product and believe that we have resolved this issue going forward to meet our customers' increased demand.

Now looking at our revenues on a geographic basis, North American Market continue to be our strongest market as was expected. Our total Americas revenue for the first quarter was approximately $54.3 million of 40% of revenue. Our total Asia-Pacific sales were approximately $44.1 million or 32% of revenue and total European and other international revenues were $38.2 million or approximately 28% of revenue.

In the first quarter, Antenna Systems product group sales totaled $64.9 million or 48% of total revenue. Base Station Subsystem sales totaled $59.1 million or 43% of revenue and Coverage Solution sales totaled $12.6 million or 9% of revenue.

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