OR YEHUDA, Israel - May 1, 2001 - Floware Wireless Systems Ltd. (NASDAQ: FLRE), a leading provider of broadband wireless access (BWA) communication systems, today announced financial results for the first quarter ended March 31, 2001.
Highlights of the quarter:
Entered into Merger of Equals agreement with BreezeCOM, Ltd. expected to close in 3Q01
Revenues for the quarter reached a record $20,337,000, up 560% from 1Q00 and 16% from 4Q00
Gross margins for the quarter increased to 29% of revenues, from 1% in 1Q00 and 22% in 4Q00
Pro-forma net loss per share for the quarter was $0.04, compared to $0.12 for 1Q00 and $0.06 for 4Q00
Major OEM agreement signed with China's Datang Telecom Technology 7 new commercial deployments during the quarter, resulting in a total of 42 commercial deployments in 24 countries, along with 20 field trials in process Revenues for the first three months of 2001 increased by 560% to $20,337,000 compared to $3,083,000 for the same period in 2000. This represents a 16% increase from $17,556,000 recorded in the fourth quarter of 2000. Gross profit for the first quarter of 2001 was $5,960,000 or 29% of revenues, compared to $35,000 or 1% of revenues during in the first quarter of 2000. Gross profit in the fourth quarter of 2000 was $3,812,000, or 22% of revenues.
On a pro-forma basis, excluding $1,042,000 in amortization of deferred stock compensation, net loss for the quarter was $1,431,000 or $0.04 per share. This compares to a pro-forma net loss for the first quarter of 2000 of $3,060,000, or $0.12 per share, and a pro-forma net loss for the fourth quarter of 2000 of $1,939,000, or $0.06 per share.
Commenting on the quarter, Amnon Yacoby, CEO of Floware, said, "During the first quarter, Floware recorded another consecutive quarter of growth and improvement according to all financial measures. Despite weakness in the overall telecom market, we continued to increase our revenues, to substantially improve our gross margins, and to improve our operating and net results.Ó
During the quarter, the Company delivered equipment worth more than $750,000 to each of seven carrier customers: Abrared and FirstMark in Spain, ArcTel and FirstMark in Germany, Telefonica in Argentina, and two leading operators in China. The Company's equipment was deployed in seven new commercial installations in Europe, Asia, Latin America and Africa. This brings the Company's total commercial deployments to 42 in 24 countries, in addition to 20 ongoing field trials.
The Company was chosen during the quarter by four new carriers located in Russia, India, Uruguay and China. The company will begin supplying initial orders to each of these customers during the second quarter.
Mr. Yacoby continued, "Our strategy has always been to concentrate on major carriers in major countries. In the current telecom market slowdown, this strategy is paying off. Many of our customers - wireless companies that are financially strong and that have solid business models -- continue to deploy wireless networks.Ó
Sales and marketing expenses for the quarter were $2,673,000, compared to $5,162,000 for the first quarter of 2000 (which included a one-time charge of $4,099,000) and $2,144,000 for the fourth quarter of 2000. In March, the Company announced a major OEM agreement with China's Datang Telecom Technology Co. Ltd., a leading Chinese telecommunications corporation. Under this agreement, Floware's WALKair BWA system will be integrated into Datang's product line and distributed in China under the Datang brand name.
Datang has committed to purchase more than $60 million in Floware equipment for Chinese carriers over the next two years, and is currently selling Floware equipment to two of the five major Chinese operators. During the quarter, the Company opened a new office in China to support its OEM partners and carrier customers.
Research and development costs for the quarter were $4,976,000, compared to $1,985,000 for the first quarter of 2000 and $4,115,000 for the fourth quarter of 2000. During the quarter, the Company released version 4.5 of the WALKair 1000 and neared completion of version 5.0. At the CeBit trade show in March, the Company unveiled its cutting-edge WALKair 3000 system, which will support a speed of 34 megabits per second (Mbps) simultaneous two way, per single user. This major increase in bandwidth will answer the need for always-on broadband connections for medium and large enterprises and multi-tenant business units.
Also during the quarter, the Company succeeded in reducing production expenses through increased manufacturing efficiencies, volume purchasing, and product engineering advances. To further reduce production expenses, the Company signed a contract with SCI Systems, a leading Electronic Manufacturing Service (EMS) Provider, for outsourced turnkey manufacturing of WALKair indoor units. Production trials have been initiated, and full production is scheduled to begin in mid-year.
Mr. Yacoby concluded, "Overall, we feel well positioned and optimistic looking forward. Despite difficult markets, we have performed very well during the first quarter, and our strategy continues to deliver improved results. We believe the merger of Floware and BreezeCOM will create sustainable growth and long term value for our shareholders.Ó
CEO Amnon Yacoby and CFO Tali Idan will host a conference call today, May 1, at 9:00 AM (Eastern) to discuss the results. To participate in the call, please dial (913) 981-5508 ten minutes prior to the scheduled start time. A replay of the call will be available from 12 PM (Eastern) on May 1 until midnight on May 7th. To access the replay, please dial (719) 457-0820 and enter code 416405.
Floware Wireless Systems Ltd. is a leading provider of point-to-multipoint fixed broadband wireless access (BWA) systems. These systems are used mainly by new carriers (CLECs) which connect business customers in the "last mile." Floware's WALKair system enables carriers to provide high-speed Internet access, as well as a wide range of voice and data services, on the 3.5, 10.5 and 26 GHz radio frequency bands. Floware currently has more than 60 deployments worldwide. On April 5, 2001 Floware entered into an agreement and plan of merger with BreezeCOM Ltd., pursuant to which, upon satisfaction of certain conditions, Floware will merge into BreezeCOM and each Floware share will convert into 0.767 shares of BreezeCOM Ltd.
This press release and statements by Floware in shareholder reports and public filings, as well as in oral public statements by Floware«s representatives may contain forward looking statements. Such statements are subjected to certain facts, risks and uncertainties that may cause actual results, events and performance to differ materially from those referred to in such statements. The risks are identified in Floware«s registration statement on Form F-1 (Registration Statement No. 333-12290) filed with the Securities and Exchange Commission. In addition, certain matters discussed in this release relate to the strategic business combination of Floware and BreezeCOM Ltd. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements - the risks that Floware and BreezeCOM businesses will not be integrated successfully; cost related to the business combinations; failure of Floware and BreezeCOM shareholders to approve the business combination; inability to obtain or meet conditions imposed for governmental approvals for the merger; inability to further identify, develop, and achieve success of new products, services, and technologies; increased competition and its effect on pricing, spending, third-party relationships, and revenues; as well as the inability to establish and maintain relationships with commerce, advertising, marketing, and technology providers.
In connection with the proposed transaction, BreezeCOM Ltd. will file a Registration Statement on Form F-4 with the United States Securities and Exchange Commission. Investors and security holders are advised to read the Registration Statement on Form F-4 when it becomes available, because it will contain important information. Free copies of the Registration Statement on Form F-4, once available, and BreezeCOM'S or Floware's other filings with the SEC may also be obtained from BreezeCOM or Floware, respectively. A copy of both companies filings with the SEC may be inspected without charge at the Public Reference Room of the United States Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part of the such filings may be obtained from the Public Reference Section of the United States Securities and Exchange Commission upon the payment of the fees prescribed by the United States Securities and Exchange Commission.
(Tables to follow)
CONDENSED STATEMENTS OF OPERATIONS U.S. dollars in thousands Three months ended March 31, 2001 2000 Revenues $ 20,337 $ 3,083 Cost of revenues 14,377 3,048 Gross profit 5,960 35 Operating expenses: Research and development 4,976 1,985 Sales and marketing, net 2,673 5,162 General and administrative 899 267 Amortization of deferred stock compensation 1,042 907 Total operating expenses 9,590 8,321 Operating loss ($3,630) (8,286) Financial income , net 1,157 220 Net loss $ (2,473) $ (8,066) Preferred shares deemed dividend - - Net loss to shareholders of ordinary shares (2,473) (4,671) Basic and diluted net loss per share $ (0.08) $ (3.75) WShares used to compute basic and diluted net loss per share 32,154,023 3,400,000 x Pro forma net loss(1) $(1,431) $(3,060) x Pro forma net loss per share $(0.04) $(0.12) x Pro forma weighted average number of shares used in computing pro forma net loss per share(2) 32,154,023 25,858,400 (1) Excluding the amortization of deferred stock compensation, the preferred shares deemed dividend (Q1-00) and the stock compensation included in marketing expenses (Q1-00). (2) Assuming a full conversion of the preferred shares into ordinary shares for the period prior to the initial public offering, in which preferred shares were outstanding. CONDENSED BALANCE SHEET U.S. dollars in thousands March 31, 2001 December 31, 2000 ASSETS Cash, cash equivalents and long-term bank deposits $ 70,753 $ 75,187 Trade receivables 12,614 10,777 Other accounts receivables and prepaid expenses 2,586 1,852 Inventories 21,313 21,416 Severance pay fund and other long-term investments 1,586 1,384 Property and equipment, net 6,588 5,275 Total assets $ 115,440 $ 115,891 LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Trade payable $ 14,377 $ 15,643 Employees and payroll accruals 3,538 2,808 Accrued expenses and other accounts payables 6,220 5,074 Total current liabilities 24,135 23,525 ACCRUED SEVERANCE PAY 1,703 1,420 Total liabilities 25,838 24,945 SHAREHOLDERS' EQUITY 89,602 90,946 Total liabilities and shareholders' equity $ 115,440 $ 115,891 Copyright © 2000 Floware Wireless Systems Ltd. All Rights Reserved.