PROX Proxim (MM)

Proxim Corporation Reports Second Quarter 2004 Financial Results SUNNYVALE, Calif., July 27 /PRNewswire-FirstCall/ -- Proxim Corporation (NASDAQ:PROX), a global leader in wireless networking equipment for Wi-Fi and broadband wireless, today announced financial results for the second quarter ended July 2, 2004. Revenue for the second quarter of 2004 was $31.4 million, which represented an 18 percent sequential increase compared to the preceding quarter of $26.7 million. The $31.4 million revenue in the second quarter of 2004 compares to $34.8 million for the second quarter of 2003. Proxim's order backlog was more than $13 million on July 2, 2004, compared with $12 million on April 2, 2004. The non-GAAP, or pro-forma, net loss from operations in the second quarter of 2004 was $(3.3) million, or $(0.03) per common share, compared to pro-forma net loss from operations of $(5.1) million, or $(0.04) loss per common share, in the first quarter of 2004, and pro-forma loss from operations of $(4.7) million, or $(0.04) per common share, in the second quarter of 2003. A detailed and specific reconciliation of the differences from the pro-forma loss from operations to the GAAP loss is included in the accompanying financial tables. The net loss attributable to common stockholders computed in accordance with GAAP for the second quarter of 2004 was $(10.1) million, or $(0.08) per common share. This compares with a GAAP net loss of $(17.5) million, or $(0.14) per common share, in the preceding first quarter of 2004 and with a GAAP net loss of $(48.7) million or $(0.40) loss per common share in the second quarter of 2003. "We are encouraged by the revenue growth compared with the prior quarter, even though it was below our expectations," said Frank Plastina, Chairman and CEO of Proxim Corporation. "Our broadband wireless business showed a strong improvement from the first quarter. Order flow continued at a healthy pace, as evidenced by our backlog of more than $13 million at the end of the quarter. However, the order flow was skewed towards the end of the quarter and reduced our chances of turning some of it into Q2 revenue. Plastina continued, "While were pleased by a strong increase in sales of our new flagship ORiNOCO AP-4000 access point product, this increase was offset by a greater than expected decrease in sales of our ORiNOCO AP-2000 product, which it is replacing. We continue to show strength in product leadership with several new products and a major WiMAX partnership with Intel launched during the second quarter. We also saw improved gross margins stemming from lower cost next-generation platforms and continued strong expense controls." Conference Call Information Proxim will host a conference call to review the company's second quarter 2004 financial results. Today's call begins at 5:00 p.m. Eastern/2:00 p.m. Pacific Time. Dial-In Information To listen to the conference call via telephone, dial 719-457-2625 at least five minutes prior to the scheduled start time. Webcast Information To listen to the webcast, go to http://www.proxim.com/, and click on the link titled "Proxim Announces Second Quarter 2004 Results Call." The minimum requirements to listen include sound capabilities on your personal computer and installation of RealPlayer software available at no cost for Windows 95/98/2000/ME/XP, Windows 3.1, Windows NT, Macintosh, and UNIX systems from RealNetworks, Inc., http://www.real.com/. The call will be archived immediately following the conference call and will remain available at http://investor.proxim.com/ . Additionally, the conference call will be available on a recorded telephone archive by calling toll free 888-203-1112 and entering pass code 751690, beginning Tuesday, July 27, 2004 at 8:00 p.m., Eastern Time until midnight Eastern Time on Friday, August 6, 2004. For international callers, the recorded telephone archive is available by calling the following toll number: 719-457-0820 and entering pass code 751690. About Proxim Proxim Corporation is a global leader in wireless networking equipment for Wi-Fi and broadband wireless networks. The company is providing its enterprise and service provider customers with wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. This press release and more information about Proxim can be found on the Web at http://www.proxim.com/. Safe Harbor This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements concerning Proxim's estimates relating to strength in product leadership and increasing global market opportunities, and are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to: Proxim's ability to maintain its debt and credit facilities; the risk that Proxim's efforts to improve operating efficiencies and return to profitability will not succeed; the risk that Proxim will not be able to convert backlog into revenue as expected; the risk that the market for Proxim's products will not grow as anticipated or that Proxim will not be able to take advantage of market opportunities due to competition, product performance, product pricing, product supply, litigation issues or other issues and other risks and uncertainties associated with Proxim's business. For additional information regarding risks relating to Proxim's business, see Proxim Corporation's Form 10-K for the year ended December 31, 2003, Form 10-Q for the quarter ended April 2, 2004, and Current Reports on Form 8-K and other relevant materials filed by Proxim with the SEC. Proxim Corporation Condensed Consolidated Balance Sheets (in thousands) (Unaudited) July 2, December 31, Assets 2004 2003 Current assets: Cash and cash equivalents $11,441 $19,756 Short-term investments 2,510 -- Accounts receivable, net 9,134 13,961 Inventory 18,056 19,939 Other current assets 5,338 5,301 Total current assets 46,479 58,957 Property and equipment, net 6,373 7,522 Goodwill and other intangible assets, net 39,330 50,059 Restricted cash 770 1,254 Other assets 427 2,316 Total assets $93,379 $120,108 Liabilities, Mandatorily Redeemable Preferred Stock and Stockholders' Deficit Current liabilities: Accounts payable $9,739 $10,500 Capital lease obligations, current 1,218 1,176 Accrued royalties and interest 28,737 26,906 Other accrued liabilities 26,599 20,804 Convertible promissory notes 38,135 34,735 Total current liabilities 104,428 94,121 Capital lease obligations, long-term 342 934 Long-term debt 101 101 Restructuring accruals, long-term 8,428 8,660 Common stock warrants 8,000 21,800 Total liabilities 121,299 125,616 Series A mandatorily redeemable preferred stock 78,325 73,580 Stockholders' deficit: Capital stock 319,510 319,376 Accumulated deficit (425,350) (397,753) Notes receivable from stockholders (711) (711) Accumulated other comprehensive income 306 -- Total stockholders' deficit (106,245) (79,088) Liabilities, mandatorily redeemable preferred stock and stockholders' deficit $93,379 $120,108 Proxim Corporation Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended July 2, June 27, July 2, June 27, 2004 2003 2004 2003 Product revenue, net $31,417 $34,805 $58,114 $68,834 License revenue -- -- -- 6,000 Total revenue, net 31,417 34,805 58,114 74,834 Cost of revenue 20,140 21,701 37,517 42,629 Royalty charges 789 -- 1,617 -- Restructuring provision for excess and obsolete inventory -- 22,549 -- 22,549 Gross profit (loss) 10,488 (9,445) 18,980 9,656 Operating expenses: Research and development 4,858 6,234 9,412 14,117 Selling, general and administrative 11,227 12,446 22,599 24,541 Legal expense for certain litigation 200 1,000 945 4,000 Amortization of intangible assets 5,364 5,365 10,728 10,865 Restructuring charges (benefit) (138) 12,492 2,029 12,492 Loss from operations (11,023) (46,982) (26,733) (56,359) Interest and other income (expense), net 3,136 (192) 2,278 (93) Loss before income taxes (7,887) (47,174) (24,455) (56,452) Income tax provision (benefit) 542 -- (203) -- Net loss (8,429) (47,174) (24,252) (56,452) Accretion of Series A preferred stock obligations (1,687) (1,560) (3,345) (3,085) Net loss attributable to common stockholders - basic and diluted $(10,116) $(48,734) $(27,597) $(59,537) Net loss per share - basic and diluted $(0.08) $(0.40) $(0.22) $(0.49) Weighted average common shares 123,404 121,714 123,293 120,354 As a percentage of revenue: Gross margin 33.4% -27.1% 32.7% 14.0% Research and development expense 15.5% 17.9% 16.2% 20.5% Selling, general and administrative expense 35.7% 35.8% 38.9% 35.7% Proxim Corporation Pro Forma Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended July 2, June 27, July 2, June 27, 2004 2003 2004 2003 Product revenue, net $31,417 $34,805 $58,114 $68,834 License revenue -- -- -- 6,000 Total revenue, net 31,417 34,805 58,114 74,834 Cost of revenue 20,140 21,701 37,517 42,629 Gross profit 11,277 13,104 20,597 32,205 Operating expenses: Research and development 4,858 6,234 9,412 14,117 Selling, general and administrative 11,227 12,446 22,599 24,541 Legal expense for certain litigation 200 1,000 945 4,000 Loss from operations (5,008) (6,576) (12,359) (10,453) Interest and other income (expense), net (96) (192) (529) (93) Loss before income taxes (5,104) (6,768) (12,888) (10,546) Income tax benefit (1,786) (2,030) (4,511) (3,164) Net loss $(3,318) $(4,738) $(8,377) $(7,382) Net loss per share - basic and diluted $(0.03) $(0.04) $(0.07) $(0.06) Weighted average common shares 123,404 121,714 123,293 120,994 As a percentage of revenue: Gross margin 35.9% 37.6% 35.4% 43.0% Research and development expense 15.5% 17.9% 16.2% 18.9% Selling, general and administrative expense 35.7% 35.8% 38.9% 32.8% Proxim Corporation GAAP to Pro Forma Net Loss Reconciliation (in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended July 2, June 27, July 2, June 27, 2004 2003 2004 2003 GAAP net loss $(10,116) $(48,734) $(27,597) $(59,537) Royalty charges and interest 919 -- 1,832 -- Restructuring provision for excess and obsolete inventory -- 22,549 -- 22,549 Amortization of intangible assets 5,364 5,365 10,728 10,865 Restructuring charges (benefit) (138) 12,492 2,029 12,492 Interest on convertible promissory notes 3,638 -- 6,186 -- Amortization of debt discount and issuance costs 1,700 -- 4,592 -- Revaluation of common stock warrants (8,700) -- (13,800) -- Accretion of Series A preferred stock obligations 1,687 1,560 3,345 3,085 Income tax benefit 2,328 2,030 4,308 3,164 Pro forma net loss $(3,318) $(4,738) $(8,377) $(7,382) Use of Pro Forma Financial Information To supplement our consolidated financial statements presented on a GAAP basis, Proxim uses non-GAAP, or pro forma, measures of operating results, net income/loss and income/loss per share, which are adjusted to exclude certain costs, expenses, gains and losses that we believe are useful to enhance the overall understanding of our financial performance. These adjustments to our GAAP results are made with the intent of providing both management and investors a supplemental understanding of Proxim's underlying operational results and trends. Adjusted pro forma results are among the primary indicators management uses as a basis for planning and forecasting our business. The presentation of this additional information is not meant to be considered in isolation or as a substitute for Proxim's financial results prepared in accordance with generally accepted accounting principles in the United States of America. DATASOURCE: Proxim Corporation CONTACT: Ben Gibson, Vice President, Corporate Marketing, +1-408-542-5200, or Michael Angel, Chief Financial Officer, +1-408-542-5200, both of Proxim Corporation Web site: http://www.proxim.com/

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