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PLX Technology, Inc. Reports First Quarter 2006 Financial Results
PLX Technology, Inc. (Nasdaq:PLXT):
-- Continued Strong Sequential Revenue, Profitability Growth
-- Continued Progress in PCI Express, USB Design Wins
-- More than 300 PCI Express Customers Sampled to Date
PLX Technology, Inc. (Nasdaq:PLXT) today announced financial results for the first quarter of 2006 which ended March 31, 2006.
For the first quarter ended March 31, 2006, PLX reported net revenues of $20.0 million, a 51 percent increase from the $13.2 million reported in the quarter ended March 31, 2005 and a 30 percent increase from the $15.3 million reported in the quarter ended December 31, 2005.
In the first quarter, the Company completed an evaluation and concluded that it is more appropriate to recognize revenues at the time of shipment to a distributor, also referred to as the sell-in basis of recognizing revenue. Prior to the first quarter the Company recognized revenues on sales to distributors when the distributor resold the product to its end customer, also referred to as the sell-through basis of recognizing revenue. Because of this change the Company recognized a one-time pick-up of $2,766,076 and $1,875,066 to revenues and gross margin, respectively. This pick-up corresponds to the amount of inventory held by the distributors as of March 31, 2006. Statement of Financial Accounting Standards No. 48, "Revenue Recognition When Right of Return Exists," sets forth conditions that must be met to recognize revenue at the time of shipment. Among those conditions is that a company that provides a right of return to a buyer be able to reasonably estimate the amount of future returns. In the past, the Company had concluded that it did not meet this condition, and therefore had deferred revenue on sales to distributors in the manner described above. The Company now believes that it is able to estimate returns and pricing concessions.
Excluding the pick-up, net revenues for the first quarter ended March 31, 2006 were $17.2 million, a 30 percent increase from the $13.2 million reported in the quarter ended March 31, 2005, and a 12 percent increase from the $15.3 million reported in the quarter ended December 31, 2005.
Net income for the first quarter ended March 31, 2006, under U.S. generally accepted accounting principles (GAAP), was $1.5 million or $0.06 per share (diluted), which included the effect of acquisition-related costs and stock option expense as prescribed by Statement of Financial Accounting Standard No. 123R (FAS 123R). This compared to a net loss under GAAP of $0.5 million, or a loss of $0.02 per share (diluted), in the quarter ended March 31, 2005. This also compares to net income under GAAP of $35,000 in the fourth quarter ended December 31, 2005, or $0.00 per share (diluted).
Pro forma net income for the first quarter ended March 31, 2006 was $3.1 million, or $0.11 per share (diluted) and excludes approximately $1.0 million in stock option expense as prescribed by FAS 123R and $0.5 million of acquisition-related costs. This compares with pro forma net income of $70,000, or $0.00 per share (diluted), in the quarter ended March 31, 2005 and pro forma net income of $0.8 million, or $0.03 per share (diluted), in the quarter ended December 31, 2005. A reconciliation between net income (loss) under GAAP and pro forma net income is provided in a table immediately below the Pro Forma Consolidated Statements of Operations.
Gross margin in the first quarter ended March 31, 2006 was 63 percent, compared with 64 percent for the fourth quarter ended December 31, 2005. Included in gross margin for the first quarter is the pick-up of $2,766,076 and $891,009, respectively, of net revenues and cost of revenues resulting from the change in the accounting for revenues to distributors. Excluding the pick-up, gross margin for the first quarter was 62 percent, compared with 64 percent for the prior quarter. The decrease in gross margin was primarily the result of higher sales of USB and PCI Express(TM) devices, which yield lower margins relative to the PCI I/O devices.
Operating expenses under GAAP for the first quarter ended March 31, 2006 of $11.3 million include $1.0 million in stock option expense as prescribed by FAS 123R and $0.5 million of acquisition-related costs. This compares with operating expenses under GAAP of $9.9 million in the prior quarter, which includes $0.7 million of acquisition-related costs. Pro forma operating expenses for the first quarter ended March 31, 2006 were $9.7 million and excludes the items noted above. This compares to pro forma operating expenses of $9.2 million for the prior quarter. The sequential increase in pro forma operating expenses was due to higher compensation and benefit expenses, increases in sales commissions to manufacturers' representatives and professional fees associated with the year-end audit and Sarbanes-Oxley compliance.
In summary, excluding the pick-up to net revenues and gross margin resulting from the change in accounting for revenues to distributors, acquisition-related costs, and share-based compensation, the Company recorded $17,200,000 in net revenues, 62 percent in gross margin, $9,700,000 million in operating expenses, $943,000 in income from operations, $1,285,000 in income before provision for income taxes and $1,242,000 in net income.
The Company's balance sheet remained strong. At March 31, 2006, cash and investments were $35.4 million, compared to $35.0 million at December 31, 2005. Additionally, there continued to be no debt.
"In the first quarter, rapid growth in our PCI Express and USB product lines drove substantial sequential revenue growth and increased profitability," said Mike Salameh, PLX Technology's chief executive officer. "In addition to growing PCI Express revenues rapidly, we continued to enhance our market leadership position by sampling our seventh PCI Express chip. To date, we have shipped samples or development systems to more than 300 customers, up from the approximately 250 in the fourth quarter of 2005.
"Recent design-win success in consumer electronics and PC peripherals drove the rapid growth in our USB product line. Thanks to the strength in our PCI Express and USB product lines, we are looking forward to continued growth in total company revenues and profits in 2006."
Business Outlook
The following statements are based on current expectations. The Company does not intend to update, confirm or change this guidance until its second-quarter earnings conference call, although it may provide additional detail regarding its guidance on today's scheduled call.
-- Revenue for the second quarter ended June 30, 2006 is expected to be between $18.0 million and $19.0 million, with approximately 19 percent to 23 percent of total revenues attributable to USB products and approximately 21 percent to 25 percent of total revenues attributable to PCI Express products.
-- Gross margins are expected to be in the range of 60 percent to 62 percent.
-- Operating expenses under GAAP are expected to be between $11.0 million and $11.4 million. Pro forma operating expenses are expected to be between $9.5 million and $9.7 million. Pro forma operating expenses exclude the effect of share-based compensation, which is expected to be between $1.0 million and $1.2 million and acquisition-related costs of approximately $0.5 million.
PLX management plans to conduct a conference call today at 2:00 p.m. PDT to discuss its first-quarter financial results, as well as its second-quarter outlook. There will also be a live Webcast and a replay of the conference call available through the Investors section of the PLX Web site at plxtech.com until April 25, 2006. The Webcast can also be accessed through www.ccbn.com. |
