Powerwave Technologies' CEO Discusses Q3 2011 Guidance - Conference Call Transcript

Powerwave Technologies, Inc. ( PWAV)

Q3 2011 Guidance Call

October 18, 2011 5:30 PM ET

Executives

Tom Spaeth – Treasurer

Kevin Michaels – CFO and Secretary

Ronald Buschur – President and CEO

Analysts

Steven O’Brien – JPMorgan

Ted Moreau – WJB Capital

Lawrence Harris – C. L. King

James Basch – Dialectic Capital

Amish Handar – Chevrolet

Armish Mesa – Tenna

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Powerwave Technologies to discuss Third Quarter Update Conference Call. My name is Kathy, and I will be your operator for today. (Operator Instructions) Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today’s call to Mr. Tom Spaeth, Vice President and Treasurer. Please proceed.

Tom Spaeth

Thank you. Good afternoon and welcome to Powerwave Technologies Third Quarter 2011 update conference call. I’m 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, third quarter preliminary revenues, revenue growth rates, customer demand and the timing of customer orders, the split between operator and 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 and market share, trends in the wireless infrastructure market, the timing of 3G and 4G buildouts, the timing of products, product deliveries and future orders, the timing in closing of the company’s headquarters, sale and leaseback transaction, 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 production issues, debt purchases, the success of new products, expense levels, capital expenditure rates, inventory turns, inventory levels, tax rates and days sales outstanding are all forward-looking statements, which are intended to qualify for the Safe Harbor from 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, realized 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, 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, our Form 10-Q for the quarterly period ended July 3, 2011, and other filings which are on file with the Securities and Exchange Commission for additional information and factors which could cause our actual results to be different from those projected or implied.

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

Kevin Michaels

Thank You, Tom. I’ll first make a brief statement, followed by Ron, and then we’ll take your questions.

First, I want to note that we have not completed our financial review procedures for the third quarter, so all amounts discussed on this call are subject to our normal quarterly close procedures. Therefore, they may end up being different from what is currently anticipated. As stated in our press release, we estimate that our third quarter revenues will be in the range $75 million to $79 million.

For the third quarter, our revenues have been impacted by several factors, which include a significant slowdown by our North American Network Operator customers, a significant reduction in activity with our regional equipment manufacturing customers, coupled with further weakness in several international markets, including Western and Eastern Europe and the Middle East.

From a global perspective, we believe that the current economic environment has caused operators to reduce or postpone their spending plans for the near term, while they evaluate the macroeconomic pressures in each individual market.

From a customer perspective, we estimate that both our OEM and Network Operator businesses will be down approximately 55% from the second quarter of this year. From a network operator perspective, we encountered a significant slowdown in North American marketplace, led by reduction in revenue with AT&T and the North American resellers that sell into AT&T.

In addition, we have experienced reduced revenues in both the European and Middle East markets. All of these factors combined together have had a significant negative impact on our third quarter revenues.

In addition, I want to note that we have entered into a sale on leaseback transaction on our headquarters facility located here in Southern California. The sales price is approximately $49.5 million and the company has simultaneously entered into a 15-year lease agreement with the purchaser. This transaction is expected to close within the next week, and the company will receive the sales proceeds upon closing of the transaction.

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