SCOTTSDALE, Ariz., Aug 01, 2007 (BUSINESS WIRE) -- Mobility Electronics, Inc. (Nasdaq: MOBE), a leading provider of
innovative portable power and computing solutions, today reported
financial results for the second quarter ended June 30, 2007. Total
revenue was $19.5 million in the second quarter of 2007, compared with
revenue of $26.1 million in the second quarter of 2006. Excluding
revenues related to business lines divested during and subsequent to
the end of the first quarter of 2007 (handheld and expansion/docking),
total revenues were $17.6 million in the second quarter of 2007,
compared to $20.2 million in the same quarter of the prior year.
According to Generally Accepted Accounting Principles in the United
States (U.S. GAAP), Mobility must consolidate the operating results of
Mission Technology Group, the acquirer of the Company's
expansion/docking business, into its financial results until such time
as the Company's financial interest in the performance of Mission
Technology Group no longer meets the criteria for consolidation.
Net loss was $4.8 million, or ($0.15) per diluted share, in the
second quarter of 2007, compared with net income of $1.3 million, or
$0.04 per diluted share, in the same quarter of the prior year. In the
second quarter of 2007, Mobility recorded the following items:
-- $4.4 million charge for excess and obsolete inventory
primarily related to portable keyboards, early versions of the
universal chargers for low-power mobile electronic devices,
and discontinued product SKUs;
-- $1.6 million net gain on sale of a patent portfolio and
disposal of a related license;
-- $1.0 million charge for non-cash equity compensation expense;
and
-- $614,000 charge for severance expense related to the departure
of the Company's former Chief Executive Officer.
Excluding the above items and the operating results of the
divested businesses, net loss was $326,000, or ($0.01) per diluted
share, in the second quarter of 2007. This compares to net income of
$793,000, or $0.03 per diluted share, in the second quarter of 2006,
which excludes the operating results of the divested businesses,
non-cash compensation expense, inventory write-downs, and an insurance
recovery. A detailed reconciliation of GAAP to non-GAAP financial
results is provided in the financial tables at the end of this
release.
Michael D. Heil, President and Chief Executive Officer of Mobility
Electronics, commented, "During the second quarter, we saw strong
growth in sales of our low-power products, which helped to offset the
expected decline in sales of high-power products through OEM channels.
Sales of low-power products increased 64% from the prior quarter,
driven by new accounts and increasing sales momentum at RadioShack,
which is now rolling out an expanded array of our low-power products
at many of their locations. We are very pleased with the continued
progress we are making in penetrating the wireless carrier channel
with our low-power products. We are now in Qwest stores, in a trial
program with T-Mobile, and preparing for a national rollout in AT&T
stores that is expected to occur later this year. We expect our
progress with the wireless channel to be a key driver of future
growth."
Strategic Changes
Following a thorough evaluation of all aspects of the Company's
business, Mobility announced the following strategic changes to its
operations:
-- Termination of Motorola Sales Representative Agreement - The
Company has terminated the sales representative and
distribution agreements that it entered into with Motorola,
Inc. in March 2005. As part of the March 2005 transaction,
Motorola also purchased shares of Mobility's common stock and
received warrants to purchase additional shares of Mobility's
common stock upon Mobility's achievement of certain
performance results. As a result of the termination of these
agreements, Motorola will forgo its right to receive a 24.5%
share of the net profit generated from Mobility's sale of its
power products for low-power mobile electronic devices.
Notwithstanding the termination of these agreements, Motorola
will continue to retain its warrants to purchase additional
shares of Mobility's common stock upon Mobility's achievement
of certain performance results.
-- Organizational Restructuring - The Company reduced its total
headcount by approximately 20% during the third quarter of
2007. The reduction in headcount reflects the Company's
commitment to more disciplined processes and an increased
focus on its most attractive and profitable opportunities. The
Company expects to record a restructuring charge of
approximately $400,000 in the third quarter of 2007 related to
the reduction in workforce. The Company estimates that the
restructuring action and other expense cuts in non-strategic
areas will reduce total operating expenses by approximately $1
million per quarter beginning in the fourth quarter of 2007.
The reduction in the fourth quarter of 2007 will be offset in
part by an anticipated increase in outside legal expense
related to intellectual property litigation the Company has
recently initiated.
-- Focus on High-Volume SKUs - The Company intends to reduce the
number of SKUs it currently offers to eliminate low-volume
products, such as customer-specific packaging options with
limited distribution. In addition, the Company will focus on
offering compatible tips only for those mobile electronic
devices that meet specific sales volume criteria and will
discontinue tips for devices that fall below that threshold.
The Company has determined that it can significantly reduce
the number of tip SKUs it currently offers and still maintain
compatibility with approximately 94% of consumer electronics
devices in product categories currently supported. The
reduction in SKUs is expected to decrease the Company's
engineering expenses and facilitate improved inventory
management. The decision to reduce SKUs significantly
contributed to the inventory write-down recorded in the second
quarter of 2007.
-- Focus Marketing Expense on Sell-Through Initiatives - The
Company intends to discontinue expenditures on national
advertising campaigns that have not proven to positively
impact sales. Future marketing expenditures will be focused on
efforts that directly support sell-through of the Company's
products to end-users, including co-op advertising plans with
major customers in the retail and wireless carrier channels,
in-store merchandising and training of store sales personnel.
Second Quarter Product Area Highlights
-- Unit sales of universal power products for high-power mobile
electronic (ME) devices, such as portable computers, were
approximately 278,000 units in the second quarter of 2007.
-- Unit sales of universal power adapters for low-power ME
devices, such as mobile phones, PDAs, MP3 players and digital
cameras, were approximately 772,000 units in the second
quarter of 2007.
-- Revenue from the sale of power products for high-power ME
devices was $11.0 million in the second quarter of 2007,
compared with $15.9 million in the same period of the prior
year.
-- Revenue from the sale of power products for low-power ME
devices was $5.6 million in the second quarter of 2007,
compared with $3.8 million in the same period of the prior
year.
-- Revenue from the sale of all power products was $16.6 million
in the second quarter of 2007, compared with $19.7 million in
the same period of the prior year.
Financial Highlights
Gross margin was 10.9% in the second quarter of 2007, compared to
28.9% in the second quarter of 2006. Excluding inventory write-downs
and the operations of the divested businesses, gross margin was 32.3%
in the second quarter of 2007, compared to 32.6% in the second quarter
of 2006.
Total operating expenses in the second quarter of 2007 were $8.9
million, compared with $6.6 million in the second quarter of 2006.
Excluding non-cash equity compensation expense, severance expense,
insurance recovery, and the operations of the divested businesses,
operating expenses were $6.4 million in the second quarter of 2007, or
36.3% of revenue (excluding revenue from divested businesses),
compared to $6.1 million in the second quarter of 2006, or 30.2% of
revenue (excluding revenue from divested businesses).
Excluding assets of the divested businesses, the Company's balance
sheet remained strong with $21.6 million in cash, cash equivalents,
and short- and long-term investments at June 30, 2007. The Company
continued to have no long-term debt and had a current ratio of 2.8 at
June 30, 2007.
Outlook
In the third quarter of 2007, the Company believes that total
revenue (excluding revenue from divested businesses) will range from
$16.0 million to $17.0 million, and fully diluted loss per share,
excluding the operating results of divested businesses, non-cash
equity compensation and restructuring charges will range from ($0.03)
to ($0.04). Guidance for the third quarter of 2007 reflects an
anticipated decline in revenue from Lenovo as the high-power adapter
program winds down and does not assume that the initial shipments to
AT&T will occur in the third quarter of 2007. Fully diluted loss per
share for the third quarter of 2007, including non-cash equity
compensation and restructuring charges, is expected to range from
($0.06) to ($0.07). The Company is unable to provide U.S. GAAP-based
financial guidance for the third quarter of 2007 because Mission
Technology Group's anticipated revenue and operating results for the
third quarter of 2007 are not accessible to the Company. Mission
Technology Group's revenue and operating results for the third quarter
of 2007, however, are not expected to be more or less significant to
the Company's consolidated financial results than they were for the
second quarter of 2007.
Commenting on Mobility's outlook, Mr. Heil said, "We anticipate
further momentum in our low-power sales as our relationships with
wireless carriers mature and existing retail customers continue to
roll out our products to more of their stores. The continued growth of
the low-power business should help to offset the loss of OEM customers
for our high-power adapters.
"In my initial months as CEO, it has become clear that Mobility
has a compelling product portfolio, but must improve its execution and
fundamentally change many of its operating strategies to successfully
capture the market opportunity available to it. We will continue to
leverage our current intellectual property portfolio and will continue
to bring innovative new products to market. However, we intend to
operate with a more customer-focused strategy, in which we will work
collaboratively with our channel partners to better understand the
types of products they want before we initiate product development
initiatives. In addition, before we place our products with a new
account, we will ensure that we have a firm plan in place regarding
merchandising, product positioning, packaging, sales force training,
inventory management, and other elements that are essential to driving
strong sell-through. Our experience has shown us that driving these
initiatives is critical to sell-through of our products, and we must
replicate this approach in all of our customer accounts.
"The restructuring action announced today reflects our commitment
to streamlining the Company, increasing our focus on our most
attractive opportunities, and developing a cost structure that will
enable the Company to become profitable as quickly as possible. We are
committed to operating with a long-term focus, and with improved
execution, we believe we can create significant value for shareholders
in the years to come," said Mr. Heil.
Non-GAAP Financial Measures
Although the Company consolidates the operating results of Mission
Technology Group, the acquirer of its docking/expansion business, for
accounting purposes under U.S. GAAP, the Company believes that the
discussion of operating results excluding the handheld and
expansion/docking lines of business, and excluding non-cash equity
compensation, excess and obsolete inventory expense, severance
expense, insurance recovery, and gain on sale of patent portfolio, net
of loss on disposal of related license assets, allows management and
investors to evaluate and compare the Company's operating performance
on a more meaningful and consistent manner. In addition, management
uses these measures internally for evaluation of the performance of
the business, including the allocation of resources. These non-GAAP
financial measures should be considered in addition to, not as a
substitute for, or superior to, measures of financial performance in
accordance with GAAP.
About Mobility Electronics, Inc.
Mobility Electronics, Inc., based in Scottsdale, Arizona, is a
developer of universal power adapters for portable computers and
mobile electronic devices (e.g., mobile phones, PDAs, digital cameras,
etc.) and creator of the patented iGo(R) intelligent tip technology.
Mobility Electronics' iGo brand offers a full line of AC, DC and
combination AC/DC power adapters for portable computers and low-power
mobile electronic devices. All of these adapters leverage the
Company's iGo intelligent tip technology, which enables one power
adapter to power/charge hundreds of brands and thousands of models of
mobile electronic devices through the use of interchangeable tips.
The Company also offers other accessories for the mobile
electronic device market, such as foldable keyboards.
Mobility Electronics' products are available at www.iGo.com as
well as through leading resellers, retailers and OEM partners. For
additional information call 480-596-0061, or visit
www.mobilityelectronics.com.
Mobility Electronics and iGo are registered trademarks of Mobility
Electronics, Inc. All other trademarks or registered trademarks are
the property of their respective owners.
This press release contains "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934. The
words "believe," "expect," "anticipate," "should," and other similar
statements of expectations identify forward-looking statements.
Forward-looking statements in this press release include expectations
regarding the Company's financial performance in the third and fourth
quarters of 2007; the expectation that Mission Technology Group's
revenue and operating results for the third quarter of 2007 will not
be more or less significant to the Company's consolidated financial
results than they were for the second quarter of 2007; the anticipated
beneficial impact of maturing relationships with wireless carriers;
the anticipated beneficial impact of existing retailers carrying
Mobility's products in more of their stores; the anticipation that the
Company's revenue from Lenovo will decline in the third quarter of
2007; the anticipation that no shipments to AT&T will occur in the
third quarter of 2007; the belief that higher sales of low-power
products will help to offset a decline in OEM revenues for high-power
products; the expectation that the Company will record a $400,000
restructuring charge in the third quarter of 2007; the belief that the
workforce reduction will reduce the Company's operating expenses by $1
million per quarter by the fourth quarter of 2007; the belief that the
Company's outside legal expense will increase as a result of
intellectual property litigation expense; and the belief that
restructuring actions will reduce the Company's cost structure and
enable it to become profitable as quickly as possible.
These forward-looking statements are based largely on management's
expectations and involve known and unknown risks, uncertainties and
other factors, which may cause the Company's actual results,
performance or achievements, or industry results, to be materially
different from any future results, performance or achievements
expressed or implied by these forward-looking statements. Risks that
could cause results to differ materially from those expressed in these
forward-looking statements include, among others, the loss of, and
failure to replace, any significant customers; the inability of the
Company's new sales and marketing strategy to generate broader
consumer awareness, increased adoption rates, or impact sell-through
rates at the retail and wireless carrier level; the timing and success
of product development efforts and new product introductions,
including internal development projects as well as those being pursued
with strategic partners; the timing and success of product
developments, introductions and pricing of competitors; the timing of
substantial customer orders; the availability of qualified personnel;
the availability and performance of suppliers and subcontractors; the
ability to expand and protect the Company's proprietary rights and
intellectual property; the successful resolution of unanticipated and
pending litigation matters; market demand and industry and general
economic or business conditions; and other factors to which this press
release refers. Additionally, other factors that could cause actual
results to differ materially from those set forth in, contemplated by,
or underlying these forward-looking statements are included in the
Company's Annual Report on Form 10-K for the year ended December 31,
2006 under the heading "Risk Factors." In light of these risks and
uncertainties, the forward-looking statements contained in this press
release may not prove to be accurate. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements, or any facts, events, or circumstances after the date
hereof that may bear upon forward-looking statements. Additionally,
the Company does not undertake any responsibility to update you on the
occurrence of unanticipated events which may cause actual results to
differ from those expressed or implied by these forward-looking
statements.
Mobility Electronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(000's except per share data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
------------------ -----------------
2007 2006 2007 2006
---------- ------- -------- --------
Net revenue $19,508 $26,147 $38,371 $48,984
Gross profit 2,119 7,566 7,525 14,523
Selling, engineering and
administrative expenses 8,886 6,577 16,906 14,870
---------- ------- -------- --------
income (loss) from
operations (6,767) 989 (9,381) (347)
Interest income (expense), net 289 315 556 618
Other income (expense), net 1,837 1 2,141 21
Litigation settlement expense - - - (250)
---------- ------- -------- --------
Income (loss) before minority
interest (4,641) 1,305 (6,684) 42
Minority interest (127) - (127) -
---------- ------- -------- --------
Net income (loss) $(4,768) $ 1,305 $(6,811) $ 42
========== ======= ======== ========
Net income (loss) per share:
Basic $ (0.15) $ 0.04 $ (0.22) $ 0.00
Diluted $ (0.15) $ 0.04 $ (0.22) $ 0.00
Weighted avg common shares
outstanding:
Basic 31,574 31,289 31,657 31,109
Diluted 31,574 32,723 31,657 32,629
Mobility Electronics, Inc. and Subsidiaries
Selected Other Data
(unaudited)
Reconciliation of non-GAAP Financial Measure - Operating results by
product line to net loss before non-cash equity compensation, excess
and obsolete inventory expense, severance expense, insurance
recovery, and gain on sale of patent portfolio, net of loss on
disposal of related license assets by product line:
Three months ended Three months ended
June 30, 2007 June 30, 2006
Power, Power,
Keyboards Expansion Keyboards Expansion
& & & &
Corporate Handheld Total Corporate Handheld Total
Net
revenue $17,606 $ 1,902 $19,508 $20,163 $ 5,984 $26,147
Gross profit 1,282 837 2,119 6,066 1,500 7,566
Selling,
engineering
and admin-
istrative
expenses 8,021 865 8,886 5,050 1,527 6,577
----------------------------------------------------------
Income
(loss)
from
operations (6,739) (28) (6,767) 1,016 (27) 989
Interest
income
(expense),
net 287 2 289 314 1 315
Other income
(expense),
net 106 1,731 1,837 1 - 1
Litigation
settlement
expense - - - - - -
------------------------------------------------- --------
Income
(loss)
before
minority
interest (6,346) 1,705 (4,641) 1,331 (26) 1,305
Minority
interest - (127) (127) - - -
----------------------------------------------------------
Net income
(loss) (6,346) 1,578 (4,768) 1,331 (26) 1,305
Non-cash
equity
compen-
sation 1,005 - 1,005 459 - 459
Excess and
obsolete
inventory
expense 4,401 - 4,401 503 212 715
Severance
expense 614 - 614 - - -
Insurance
recovery - - - (1,500) - (1,500)
Gain on sale
of patent
portfolio,
net of loss
on disposal
of related
license
assets - (1,585) (1,585) - - -
----------------------------------------------------------
Net income
(loss) as
adjusted $ (326) $ (7) $ (333)$ 793 $ 186 $ 979
==========================================================
Net income
(loss) per
share as
adjusted $ (0.01) $ (0.00) $ (0.01)$ 0.03 $ 0.01 $ 0.03
Weighted avg
common
shares
outstanding
-- basic: 31,574 31,574 31,574 31,289 31,289 31,289
Mobility Electronics, Inc. and Subsidiaries
Selected Other Data
(unaudited)
Reconciliation of non-GAAP Financial Measure - Gross profit by product
line to gross profit before excess and obsolete inventory expense by
product line:
Three months ended Three months ended
June 30, 2007 June 30, 2006
Power, Power,
Keyboards Expansion Keyboards Expansion
& & & &
Corporate Handheld Total Corporate Handheld Total
Gross
profit $ 1,282 $837 $ 2,119 $6,066 $1,500 $7,566
Excess and
obsolete
inventory
expense 4,401 - 4,401 503 212 715
--------- -------- -------- --------- -------- -------
Gross
profit as
adjusted $ 5,683 $837 $ 6,520 $6,569 $1,712 $8,281
========= ======== ======== ========= ======== =======
Reconciliation of non-GAAP Financial Measure - Selling, engineering
and administrative expenses by product line to selling, engineering
and administrative expenses before non-cash equity compensation,
severance expense and insurance recovery by product line:
Three months ended Three months ended
June 30, 2007 June 30, 2006
Power, Power,
Keyboards Expansion Keyboards Expansion
& & & &
Corporate Handheld Total Corporate Handheld Total
Selling,
engin-
eering and
admin-
istrative
expenses $ 8,021 $865 $ 8,886 $5,050 $1,527 $6,577
Non-cash
equity
compen-
sation (1,005) - (1,005) (459) - (459)
Severance
expense (614) - (614) - - -
Insurance
recovery - - - 1,500 - 1,500
--------- -------- -------- --------- -------- -------
Selling,
engin-
eering and
admin-
istrative
expenses as
adjusted $ 6,402 $865 $ 7,267 $6,091 $1,527 $7,618
========= ======== ======== ========= ======== =======
This information is being provided because management believes these
are key metrics to the investment community and assist in the
understanding and analysis of operating performance. Operating
results by product line and corresponding net loss before non-cash
equity compensation, excess and obsolete inventory expense, severance
expense, insurance recovery, and gain on sale of patent portfolio,
net of loss on disposal of related license assets; gross profit by
product line and corresponding gross profit before excess and
obsolete inventory expense; and selling, engineering and
administrative expenses by product line and corresponding selling,
engineering and administrative expenses before non-cash equity
compensation, severance expense and insurance recovery should be
considered in addition to, not as a substitute for, or superior to,
measures of financial performance in accordance with GAAP.
Mobility Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(000's)
June 30, December 31,
2007 2006
----------- ------------
(unaudited)
ASSETS
Cash and cash equivalents $16,583 $ 9,201
Short-term investments 4,113 8,143
Accounts receivable, net 18,313 20,855
Inventories 5,681 12,350
Prepaid expenses and other current
assets 460 405
----------- ------------
Total current assets 45,150 50,954
Long-term investments 1,746 4,636
Other assets, net 11,103 10,274
----------- ------------
Total assets $57,999 $65,864
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $15,875 $16,459
Minority interest 127 -
----------- ------------
Total liabilities 16,002 16,459
Total stockholders' equity 41,997 49,405
----------- ------------
Total liabilities and
stockholders' equity $57,999 $65,864
=========== ============
Mobility Electronics, Inc. and Subsidiaries
Selected Other Data
(unaudited)
Reconciliation of non-GAAP Financial Measure - Balance sheet excluding
accounts of Mission Technology Group.
June 30, 2007
------------------------------------------
Mission
Mobility Tech Eliminations Consolidated
-------- ------- ------------ ------------
ASSETS
Cash and cash
equivalents $15,783 $ 800 $ - $16,583
Short-term investments 4,113 - - 4,113
Accounts receivable,
net 17,774 576 (37) 18,313
Inventories 4,894 1,228 (441) 5,681
Prepaid expenses and
other current assets 386 74 - 460
-------- ------- ------------ ------------
Total current assets 42,950 2,678 (478) 45,150
Long-term investments 1,746 - - 1,746
Other assets, net 12,737 1,702 (3,336) 11,103
-------- ------- ------------ ------------
Total assets $57,433 $4,380 $(3,814) $57,999
======== ======= ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $15,458 $ 454 $ (37) $15,875
Minority interest - 3,904 (3,777) 127
-------- ------- ------------ ------------
Total liabilities 15,458 4,358 (3,814) 16,002
Total stockholders'
equity 41,975 22 - 41,997
-------- ------- ------------ ------------
Total liabilities and
stockholders' equity $57,433 $4,380 $(3,814) $57,999
======== ======= ============ ============
Reconciliation of non-GAAP Financial Measure - Cash, cash equivalents,
short-term investments and long-term investments excluding accounts
of Mission Technology Group.
Cash and cash
equivalents $15,783 $ 800 $ - $16,583
Short-term investments 4,113 - - 4,113
Long-term investments 1,746 - - 1,746
Total cash, cash equivalents,
short-term investments,
and long-term
investments $21,642 $ 800 $ - $22,442
======== ======= ============ ============
This information is being provided because management believes these
are key metrics to the investment community and assist in the
understanding and analysis of financial position. Balance sheet
excluding the accounts of Mission Technology Group and related
eliminations and cash, cash equivalents, short-term investment, and
long-term investments excluding the accounts of Mission Technology
Group should be considered in addition to, not as a substitute for,
or superior to, measures of financial position in accordance with
GAAP.
SOURCE: Mobility Electronics, Inc.
Financial Relations Board
Tony Rossi
213-486-6540
trossi@frbir.com
