Zhone Technologies Reports Fourth Quarter 2014 Financial Results

Zhone Technologies, Inc. (NASDAQ:ZHNE), a global leader in the fiber access market, today reported its financial results for the fourth quarter ended December 31, 2014.

Revenue for the fourth quarter of 2014 was $30.1 million compared to $29.4 million for the third quarter of 2014 and $32.3 million for the fourth quarter of 2013. Net loss for the fourth quarter of 2014, calculated in accordance with generally accepted accounting principles ("GAAP"), was $2.1 million or $0.06 per share compared with net loss of $2.7 million or $0.08 per share for the third quarter of 2014 and net income of $1.4 million or $0.04 per share for the fourth quarter of 2013. Adjusted earnings before stock-based compensation, interest, taxes, and depreciation ("adjusted EBITDA") was an adjusted EBITDA loss of $1.7 million for the fourth quarter of 2014, compared to an adjusted EBITDA loss of $2.2 million for the third quarter of 2014 and an adjusted EBITDA profit of $1.6 million for the fourth quarter of 2013.

"We entered 2015 with a renewed level of confidence that we will grow revenue in both our service provider and enterprise businesses," stated Jim Norrod, Zhone's chief executive officer. "We are equally confident that our focused business structure and decisive business restructuring will lead to profitability which remains our primary financial objective."

Cash and cash equivalents at December 31, 2014 was $11.5 million compared to $15.7 million at December 31, 2013.

Zhone will conduct a conference call and audio webcast today, January 27, 2015, at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its fourth quarter 2014 results. This call is open to the public by dialing +1 (866) 953-6859 for U.S. callers and +1 (617) 399-3483 for international callers and then entering passcode 80013849. The audio webcast will be simultaneously available on the Investor Relations section of Zhone's website at http://www.zhone.com/investors/.

A replay of the conference call will be available after 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 92794848. An audio webcast replay will also be available online at http://www.zhone.com/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 adjusted 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 income (loss) calculated on a GAAP basis and adjusted EBITDA on a non-GAAP basis is provided in a table immediately following the Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss).

About Zhone Technologies

Zhone Technologies, Inc. (NASDAQ:ZHNE) is a global leader in fiber access transformation for service provider and enterprise networks, serving more than 750 of the world's most innovative network operators. The IP Zhone is the only solution that enables service providers to build the network of the future today, supporting end-to-end Voice, Data, Entertainment, Social Media, Business, Mobile Backhaul and Mobility service. Zhone is committed to building the fastest and highest quality all IP Multi-Service solution for its customers. Zhone is headquartered in California and its products are manufactured in the USA in a facility that is emission, waste-water and CFC free.

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 products' names are all subject to change without notice.

Forward-Looking Statements

This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "target," "will," "would," variations of such words, and similar expressions are intended to identify forward-looking statements. In addition, forward-looking statements include, among others, statements that refer to financial estimates; projections of revenue, margins, expenses or other financial items. Readers are cautioned that actual results could differ materially from those expressed in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, commercial acceptance of the Company's products; intense competition in the communications equipment market; the Company's ability to execute on its strategy and operating plans; and economic conditions specific to the communications, networking, internet and related industries. In addition, please refer to the risk factors contained in the Company's SEC filings available at www.sec.gov, including without limitation, the Company's annual report on Form 10-K for the year ended December 31, 2013 and the Company's quarterly reports on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014, and September 30, 2014. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update or revise any forward-looking statements for any reason.
 

ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands, except per share data)
 
 

Three Months Ended
       

 

Twelve Months Ended
December 31,  

September 30,
  December 31, December 31,   December 31,
2014     2014     2013             2014     2013  
 
Net revenue $ 30,115 $ 29,436 $ 32,306 $ 120,582 $ 122,248
Cost of revenue 20,909 18,681 20,197 78,741 76,116
Stock-based compensation   5       1       -               7       -  
Gross profit   9,201       10,754       12,109               41,834       46,132  
Operating expenses:
Research and product development (1) 4,419 4,611 3,812 17,340 15,326
Sales and marketing (1) 4,822 4,775 5,620 19,079 20,159
General and administrative (1)   2,052       4,024       1,283               9,409       6,199  
Total operating expenses   11,293       13,410       10,715               45,828       41,684  
Operating income (loss) (2,092 ) (2,656 ) 1,394 (3,994 ) 4,448
Other income (expense), net   (3 )     (36 )     2               (69 )     (92 )
Income (loss) before income taxes (2,095 ) (2,692 ) 1,396 (4,063 ) 4,356
Income tax provision (benefit)   2       13       (36 )             68       42  
Net income (loss) $ (2,097 )   $ (2,705 )   $ 1,432             $ (4,131 )   $ 4,314  
Other comprehensive income (loss)   (70 )     (16 )     (38 )             (100 )     (151 )
Comprehensive income (loss) $ (2,167 )   $ (2,721 )   $ 1,394             $ (4,231 )   $ 4,163  
 
Weighted average shares outstanding
Basic 32,484 32,384 31,896 32,380 31,429
Diluted 32,484 32,384 34,287 32,380 33,021
 
Earnings per common share
Basic $ (0.06 ) $ (0.08 ) $ 0.04 $ (0.13 ) $ 0.14
Diluted $ (0.06 ) $ (0.08 ) $ 0.04 $ (0.13 ) $ 0.13
 
 
(1) Amounts include stock-based compensation costs as follows:
Research and product development $ 7 $ 2 $ 1 $ 11 $ 2
Sales and marketing 15 5 1 29 2
General and administrative   228       356       55               739       420  
$ 250 $ 363 $ 57 $ 779 $ 424
 
GAAP net income (loss) $ (2,097 ) $ (2,705 ) $ 1,432 $ (4,131 ) $ 4,314
Stock-based compensation 255 364 57 786 424
Interest expense 11 36 11 68 85
Income taxes 2 13 (36 ) 68 42
Depreciation   118       102       101               403       367  
Non-GAAP Adjusted EBITDA income (loss) $ (1,711 )   $ (2,190 )   $ 1,565             $ (2,806 )   $ 5,232  

 
 
ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
       

December 31,
December 31,

2014

2013
 

Assets
Current assets:
Cash, cash equivalents and short-term investments $11,528 $15,686
Accounts receivable 29,916 33,328
Inventories 19,985 19,562
Prepaid expenses and other current assets 2,863       2,269  
Total current assets 64,292 70,845
Property and equipment, net 1,165 718
Other assets 255       254  
Total assets $65,712       $71,817  
 

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $11,719 $12,689
Line of credit 10,000 10,000
Accrued and other liabilities 7,669       8,865  
Total current liabilities 29,388 31,554
Other long-term liabilities 1,981       2,704  
Total liabilities 31,369       34,258  
Stockholders' equity:
Common stock 32 32
Additional paid-in capital 1,075,309 1,074,294
Other comprehensive income (35 ) 65
Accumulated deficit (1,040,963 )     (1,036,832 )
Total stockholders' equity 34,343       37,559  
Total liabilities and stockholders' equity $65,712       $71,817  
 

Copyright Business Wire 2010

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