Powerwave Technologies CEO Discusses Q2 2011 Results - Earnings Call Transcript

Powerwave Technologies, Inc. ( PWAV)

Q2 2011 Earnings Call

August 4, 2011 5:00 pm ET

Executives

Tom Spaeth – Vice President, Treasurer

Ronald J. Buschur – President and Chief Executive Officer

Kevin T. Michaels – Chief Financial Officer and Secretary

Analysts

Matthew D. Ramsay – Canaccord Genuity

Steven O'Brien – JPMorgan

Scott Searle – Merriman Capital, Inc.

Lawrence Harris – C.L. King & Associates, Inc.

Ted Moreau – WJB Capital Group, Inc.

Tony Rao – East Shore Partners

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Powerwave Technologies Incorporated Earnings Conference Call. My name is Caris and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to your host for today Mr. Tom Spaeth, Powerwave’s Treasurer. Please proceed, sir.

Tom Spaeth

Thank you. Good afternoon, and welcome to Powerwave Technologies second 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, 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 and days sales outstanding are all forward-looking statements which are intended to qualify for the Safe Harbor and the liability established by the Private Securities Reform Act of 1995.

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 our Form 10-Q for the quarterly period ended April 3, 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 will 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 T. Michaels

Thank you, Tom. And 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 second quarter of 2011 were $170.6 million and we reported a GAAP net income of $7 million, which equates to basic and fully diluted earnings 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 $1.9 million of non-cash pre-tax stock based compensation expense in the quarter. All of these charges and amortization totaled approximately $2.7 million for the second 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 operating income equal to 8.6% of revenue and pro forma net income of $9.2 million, which equates to a pro forma net earnings of $0.05 per share.

Now looking at our revenues on a geographic basis, the North American market continues to be our strongest market as was expected. Our total Americas revenue for the second quarter was approximately $80.2 million or 47% of revenue. Our total Asia-Pacific sales were approximately $41.8 million or 25% of revenue and total European and other international revenues were $48.6 or approximately 28% of revenue.

In the second quarter, Antenna Systems product group sales totaled $76 million, or 45% of total revenue. Base Station Subsystem sales totaled $77.6 million or 45% of revenue and Coverage Solutions sales, totaled $17 million or 10% of revenue.

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