DUBLIN, Ireland, Oct. 17 /PRNewswire/ -- Parthus Technologies plc (Nasdaq: PRTH - news; LSE: PRH) today announced its financial results for the third quarter and for the nine months ended September 30, 2001.
Highlights for the third quarter ended September 30, 2001 (U.S. GAAP)
-- Licensing and royalty revenue grew 83% year-on-year to $8.2 million,
up 15% sequentially from $7.2 million
-- Five licensing agreements were signed including three with new
customers to Parthus
-- NavStream3000, an enhanced GPS silicon IP and software platform,
was launched
-- A licensing agreement was announced with Motorola for the
joint-development of power-management products
-- Total revenue increased 22% year-on-year to $10.5 million, up 3% from
$10.2 million in the second quarter
-- Total gross margin grew three percent to 73%, positively impacted
by the changing revenue mix
-- Pro forma* basic and diluted net losses per share amounted to $0.0056
per ordinary share or $0.056 per ADS
Highlights for the nine months ended September 30, 2001 (U.S. GAAP)
-- Licensing and royalty revenue grew 95% year-on-year to $21.3 million
-- 20 licensing and royalty agreements were signed
-- Total revenue increased 35% year-on-year to $30.4 million
-- The total number of licensing and royalty agreements is now 69
-- The customer base has grown to over 40 key accounts world-wide
-- Pro forma* basic and diluted net losses per share amounted to $0.016
per ordinary share or $0.163 per ADS
* Pro forma results exclude amortization of intangibles, an in process R&D
charge and non-cash stock compensation expense.
Commenting today, Brian Long, Chief Executive Officer, said:
``We are pleased to have delivered another solid performance particularly with such difficult market conditions in the electronics industry. Most significantly, the leading indicator for our business, licensing and royalty revenues, increased 83% year-on-year and 15% sequentially to $8.2 million. This performance is ahead of expectations and validates the resilience of our IP licensing business model. We have the financial strength, with cash on hand of $127 million and a low cash requirement, to continue to build upon our technology portfolio and customer relationships.''
Commenting today, Kevin Fielding, President, said:
``Customer demand for our technology remains firm, demonstrated by our ability to continue to sign license deals: five new licensing agreements signed this quarter, including a new top-ten wireless semiconductor partner, as yet undisclosed. Today we announced a licensing and royalty agreement with Motorola for the joint development of power management IC products, a core technology critical for next generation wireless handsets. Also in the third quarter, we launched the NavStream3000 location platform, which represents a significant breakthrough in delivering highly accurate GPS location positioning in the most challenging environments.''
Commenting today, Elaine Coughlan, Chief Financial Officer, said:
``In the third quarter gross margins grew a further three percent to 73%, the pro forma net loss declined to $3.25 million and the pro forma net loss per share is significantly better than expected at $0.0056. We believe these metrics are strong indicators of our progress towards a return to profitability and we believe we are on track to achieve breakeven in mid-2002. We took proactive action in the quarter on our underlying cost structure as market conditions deteriorated further in the global economy. In the fourth quarter we expect higher margin licensing revenue to continue to grow and despite the severe slowdown we expect modest sequential growth in our overall revenues.''
Operating and financial review for the three months ended September 30, 2001
Licensing Today the company announced a licensing and royalty agreement with Motorola (NYSE: MOT - news) and the joint development of power management technology and a series of power management integrated circuits (ICs). The power requirement of next generation wireless handsets places demands that current battery technology cannot meet. Therefore one of the core requirements for the success of these devices is for highly advanced power management integrated circuits and techniques. The first deployment by Motorola is an advanced power management IC that improves power management performance for wireless devices whilst simultaneously reducing cost of deployment by integrating all power management functions on a single chip. The deployment is targeted at high volume wireless products, which will use power management circuits from Motorola Semiconductor division and is the first release from the power management R&D team at Parthus. A joint technical release with Motorola will be announced in due course.
In the third quarter the company signed five licensing agreements, three with new customers and announced three licensing deals. The customer base now exceeds 40 key accounts including six of the Top 10 wireless semiconductor companies worldwide. In September Parthus announced that the company had signed a licensing agreement with Sun Microsystems for the joint development and deployment of Java(TM) technologies targeting wireless devices based on the Parthus MachStream(TM) platform. This initiative is designed to allow major electronics developers and manufacturers to deliver Java technology-based multimedia wireless devices with ``PC-like'' levels of performance and extended battery life. In August a licensing and royalty agreement for the BlueStream(TM) Bluetooth platform was announced with Aralion, a large Asian ASIC vendor. Also in August the company announced that SigmaTel, a provider of system-level, mixed-signal integrated circuit solutions for the audio and wireless infrared markets had licensed the MediaStream(TM) platform. SigmaTel will target its single-chip audio integrated circuit at the portable audio (including MP3 players, cell phones, PDAs and digital cameras) and home entertainment markets.
Partnering In October Parthus and Wipro Technologies, a leading provider of semiconductor and system-level design services for the embedded systems market, jointly announced an IP Partner Program between the two companies. Wipro has design services engagements with some of the world's leading wireless OEM and semiconductor companies, including Nokia, Ericsson and Intel. Through this program, Wipro becomes the first selected partner certified to implement and integrate the full portfolio of Parthus platforms. This partnership agreement expands the channel for the Parthus portfolio of mobile Internet technologies and gives Parthus licensees access to Wipro's leading system-on-chip (SOC) design resources.
Technology Since the end of the third quarter Parthus has announced the launch of NavStream 3000, a GPS silicon IP and software platform that delivers greatly enhanced indoor and outdoor positioning accuracy across a range of devices, including mobile phones and automobiles. The significant breakthrough is the rapid ability of this platform to determine location in practically any environment. In extensive trials NavStream3000 obtained position fixes in homes, office and industrial buildings, exceeding FCC e911 requirements for speed and accuracy. The platform has already been licensed to a number of leading industry players and Parthus anticipates that it will be of significant interest to the industry in the medium term.
Organization During the third quarter, the integration of Chicory Systems, acquired during the second quarter, was successfully completed in all key business areas. Headcount remained relatively stable at 428 employees, compared with 429 at the end of June 2001. Low levels of attrition were offset by recruitment in software development.
Income Statement Total revenue for the third quarter amounted to $10.5 million, a 22% year-on-year increase, and a 3% increase on the second quarter 2001 revenue of $10.2 million. IP licensing and royalty revenue grew to $8.2 million, up 83% from $4.5 million in the third quarter of 2000 and up 15% from $7.2 million in the second quarter of this year. Royalty revenue increased to $134,000, up 168% year-on-year but was down approximately 4% compared with the prior quarter. These revenues represent approximately 1% of total revenue in both the second and third quarter of this year. The planned decrease in IP creation continued and revenue from this business stream amounted to $1.3 million in the third quarter, down 58% year-on-year and 34% from the second quarter 2001. Hard IP revenue continued to reflect the general slowdown in current product volumes in the semiconductor industry and declined 14% to $961,000 from $1.1 million in the second quarter.
Gross margins grew to 73%, up three percent over the second quarter and a 14 percent increase year-on-year. The gross margin improvement reflects the continued shift in the revenue mix to higher margin IP licensing and royalty revenue, which accounted for 79% of total revenue in the third quarter. This compares with 52% of total revenue in the third quarter 2000 and 70% in the second quarter 2001. Parthus is ahead of plan with gross margin improvement, signaling the company's ongoing commitment to a return to profitability.
The company took pre-emptive cost management action during the quarter including reducing discretionary spending where possible and a pay and bonus freeze throughout the company. This ensured that financial resources were focused on key operating areas. Research and development investment grew 8% sequentially to $7.8 million. The second quarter acquisition of Chicory Systems accounted for the majority of this increase. Sales and marketing expenditure overall decreased by 9% to $2.6 million in the third quarter. The increase in sales expense was more than offset as the benefits of the earlier expenditure in branding and product launches flowed through to a reduction in discretionary marketing costs in those areas. General and administration costs decreased 4% to $1.7 million, due to ongoing vigilance and strict cost management.
Both amortization of intangibles and non-cash stock compensation increased as a direct result of the full quarterly impact of the second quarter acquisitions. In the third quarter, amortization of intangibles increased to $3.7 million from $1.3 million and non-cash stock compensation expense amounted to $525,000, up from $420,000 in the second quarter. As indicated in the second quarter results announcement, Parthus incurred a once-off non-cash charge of $10.9 million relating to in process R&D in connection with the acquisition of Chicory Systems. At the date of acquisition Chicory had incurred costs associated with the development of technology. Under U.S. GAAP this is classified as in process R&D and when acquired in a transaction is treated as a cost and expensed upon final allocation of the purchase price. Amortization of intangibles, in process R&D and non-cash stock compensation expense are included in operating expenses.
Interest income declined to $1.3 million in the third quarter from $1.7 million in the second quarter. This reflects lower cash balances and the lower interest rate environment.
The pro forma net loss for the third quarter amounted to $3.25 million, representing a loss of $0.0056 per ordinary share or $0.056 per ADS. This compares with a pro forma net loss in the second quarter 2001 of $3.3 million, representing a loss of $0.0061 per ordinary share or $0.061 per ADS. Pro forma results exclude amortization of intangibles, in process R&D and non-cash stock compensation expense. The net loss for the third quarter was $18.4 million, representing a loss of $0.0318 per ordinary share or $0.318 per ADS.
Operating and financial review for the nine months ended September 30, 2001
Operations Parthus delivered a strong performance for the first nine months of 2001, particularly in light of the severe decline in the semiconductor industry. Solid progress continued in key areas:
-- IP licensing and royalty revenue was 70% of total revenue, on track
for the medium term target of 80%
-- Gross margins grew to 69%, well ahead of the internal timetable for
generating gross margins of 70% by 2002
-- The quarterly operating net loss leveled-off as operating leverage and
cost management flowed through
-- The customer base is over 40 key accounts, including six of the Top 10
wireless semiconductor companies
-- The company has signed a total of 69 licensing and royalty agreements
to date
-- 66% of licensing is repeat business, validating the technology and
strengthening existing customer relationships
Income statement Total revenue for the nine months ended September 30, 2001 amounted to $30.4 million, up $7.8 million or 35% from $22.6 million for the same period last year. IP licensing and royalty revenue grew 95% to $21.3 million, up $10.3 million over the first nine months of 2000. Licensing and royalty revenue accounted for 70% of total revenue, up from 48% for the same period in 2000. Royalty revenue of $416,000 was recognized in the nine months and this compares with $50,000 for the corresponding period last year. IP creation declined to $5.6 million, down from $9.8 million for the first nine months of 2000 in line with the continuing planned shift away from lower margin contract design work. Hard IP revenue grew from $1.9 million for the nine months ended September 30, 2000 to $3.6 million for the nine months ended September 30, 2001.
Total gross margin increased from 57% for the first nine months of 2000 to 69% for the same period this year.
Research and development investment grew from $12.6 million to $20.9 million in the first nine months of this year, as Parthus continued its investment, internally and by acquisition, in developing and licensing a strong portfolio of technology platforms. Sales and marketing grew $1.8 million to $8.1 million in the first nine months of this year, from $6.3 million for the first nine months of 2000. General and administration expenses increased $1.9 million to $5.4 million for the first nine months of 2001, up from $3.5 million for the same period last year. Amortization of intangibles grew to $5.4 million, up $4.7 million, reflecting the higher level of acquisition activity this year. Non-cash stock compensation expense amounted to $1.3 million, a decrease of $3.8 million from $5.1 million for the first nine months of last year. The charges in 2000 relate primarily to the amortization of a non-cash charge resulting from variable stock options that were granted to some of the company's executives. Parthus incurred a once-off charge of $10.9 million in the third quarter 2001 relating to in process R&D in connection with the acquisition of Chicory Systems in the second quarter of 2001. There was no comparable 2000 charge.
Interest income increased $2 million, from $3.1 million for the first nine months of 2000 to $5.1 million for the same period this year. This reflects the higher cash balances held in 2001.
The pro forma net loss for the nine months ended September 30, 2001 amounted to $9 million, representing a loss of $0.016 per ordinary share or $0.163 per ADS. This compares with a pro forma net loss in the first nine months of 2000 of $7.4 million, representing a loss of $0.016 per ordinary share or $0.163 per ADS. Pro forma results exclude amortization of intangibles, in process R&D and non-cash stock compensation expense. The net loss for the nine months ended September 30, 2001 was $26.6 million, representing a loss of $0.048 per ordinary share or $0.481 per ADS. This compares with $13.2 million, representing a loss of $0.029 per ordinary share or $0.291 per ADS, for the first nine months of 2000.
Balance sheet and cash flow
At September 30, 2001 total assets amounted to $214.2 million, compared with total assets of $233.4 million at June 30, 2001. The change reflects the decrease in intangible assets arising from the in process R&D charge, quarterly movements in working capital and a modest decrease in cash on hand.
Cash and cash equivalents amounted to $127.1 million at September 30, 2001 compared with $129.0 million at June 30, 2001. Cash outflow at the operating level at $1.2 million remains within the company's target range of $2 million cash flow per quarter. Deferred revenue decreased $1.1 million to $7.1 million reflecting the timing of invoicing associated with licensing activity in the last three weeks of the quarter.
Intangible assets amounted to $71.5 million at September 30, 2001 compared with $85.7 million at June 30, 2001. The decrease of $14.2 million in the third quarter reflects the final allocation of the purchase price on the acquisition of Chicory Systems, which resulted in a once-off in process R&D charge of $10.9 million.
Accounts receivable amounted to $4.5 million at the end of the third quarter compared with $5.6 million at the end second quarter. Debtors' days outstanding decreased to 37 days from 49 days in the second quarter due to strong cash collections within the quarter.
Outlook
Despite the current background of uncertainty and the steep down cycle in the semiconductor industry, Parthus expects licensing revenue to continue to grow reflecting strong demand for the company's products. The company expects a modest sequential increase in fourth quarter revenue overall. Parthus continues to expect to achieve breakeven in mid-2002.
Forward Looking Statements
This press release may contain ``forward looking statements'' which are subject to certain risks and uncertainties that could cause actual results to differ materially from those stated. Any statements that are not statements of historical fact (including, without limitation, statements to the effect that the company or its management ``believes,'' ``expects,'' ``anticipates,'' ``plans'' and similar expressions) should be considered forward-looking statements. Important factors that could cause actual results to differ from those indicated by such forward-looking statements include uncertainties relating to the acceptance of semiconductor intellectual property offerings, expansion of the company's business, and quarterly variations in results. These factors and other uncertainties are discussed in our 2000 Annual Report on Form 20-F, which was filed with the U.S. Securities and Exchange Commission on June 26, 2001. Forward-looking statements represent estimates as of today, and should not be relied upon as representing the company's estimates as of any subsequent date. Although the company may elect to update forward-looking statements in the future, the company disclaims any responsibility to do so... |
