YDIW Ydi Wireless (MM)

Terabeam Wireless, the business name of YDI Wireless, Inc. (NASDAQ:YDIW), a leading developer and supplier of broadband wireless solutions, today announced its financial results for its third quarter ended September 30, 2005. These financial results include, for the period beginning on July 27, 2005, results from the operations that Terabeam Wireless acquired from Proxim Corporation on July 27, 2005. Revenue for the quarter ended September 30, 2005 was $18.1 million, an increase of approximately 151% from the revenue of $7.2 million for the quarter ended June 30, 2005 and an increase of approximately 183% from the revenue of $6.4 million for the quarter ended September 30, 2004. The significant increase in revenue over the prior quarter and prior year resulted primarily from the acquisition of the operations of Proxim Corporation that was completed in the third quarter 2005. The net loss attributable to common shareholders computed in accordance with generally accepted accounting principles (GAAP) for the quarter ended September 30, 2005 was $10.0 million ($0.47 per share-diluted) compared with a GAAP net loss of $987,000 ($0.04 per share-diluted) for the quarter ended June 30, 2005 and a GAAP net loss of $2.4 million ($0.09 per share-diluted) for the quarter ended September 30, 2004. The third quarter 2005 GAAP net loss attributable to common shareholders included $7.8 million of restructuring provisions and charges as a result of the purchase of the operations of Proxim Corporation by Terabeam Wireless. The non-cash provisions and charges totaled $6.8 million and consisted of (i) $2.1 million for excess and obsolete Terabeam inventory, (ii) $3.6 million for impairment of our Terabeam trade name, and (iii) approximately $1.1 million for the write-off of capitalized Terabeam software development. In addition, there were one time restructuring charges of approximately $944,000 relating to severance and leased buildings that were vacated. Pro forma net loss for the third quarter of 2005 was approximately $2.3 million ($0.11 per share-diluted), compared with a pro forma net loss for the second quarter of 2005 of $987,000 ($0.04 per share-diluted) and a pro forma net loss for the third quarter of 2004 of $2.4 million ($0.09 per share-diluted). These pro forma numbers are intended to present what the company's net loss would have been without the restructuring charges described in the preceding paragraph. Management believes that presenting a GAAP to pro forma net loss reconciliation may permit investors to better compare results from period to period and more accurately assess the company's prospects in a normal operating period. A detailed and specific reconciliation is included in an accompanying financial table. Robert Fitzgerald, Terabeam's Chief Executive Officer, stated, "This quarter was an extremely exciting and challenging quarter as we acquired and integrated the assets and operations of Proxim Corporation. We are very pleased with the loyalty of Proxim's customers and channel partners and the demand for our products. We are working diligently to balance our cost structure with our revenue level. We believe that we are positioned to deliver much stronger results in the fourth quarter." Corporate Name and Ticker Symbol Changes As previously announced, YDI Wireless will be changing its corporate name to "Terabeam, Inc." and its ticker symbol to "TRBM." These changes will become effective shortly before markets open on Monday, November 7, 2005. Conference Call Information Terabeam Wireless will host a conference call to discuss this release, financial results, developments at the company, and other matters of interest to investors and others on November 3, 2005 starting at 5:00 p.m. Eastern Time. The discussion may include forward-looking information. To participate in this conference call, please dial 800-946-0716 (or 719-457-2644 for international callers), confirmation code 7450401 for all callers, at least ten minutes before start time. The conference call will also be broadcast live over the Internet. Investors and others are invited to visit Terabeam Wireless' website at http://www.terabeam.com/corporate to access this broadcast. Replays will be available telephonically for approximately one week by dialing 888-203-1112 for domestic callers and 719-457-0820 for international callers, confirmation code 7450401 for all callers, and over the Internet for approximately 90 days at Terabeam Wireless' website at http://www.terabeam.com/corporate. About YDI Wireless / Terabeam YDI Wireless, Inc. has been using Terabeam Wireless as a business name and will soon be renamed Terabeam, Inc. The company's subsidiary Proxim Wireless Corporation is a global leader in providing Wi-Fi and other broadband wireless solutions to meet the performance, scalability, and security requirements of enterprises, government, and service providers. The company's subsidiary Ricochet Networks, Inc. is a leading portable Wireless Internet Service Provider (WISP) with operational markets in Denver and Aurora, Colorado and San Diego, California. Additional information about the company can be found at the company's website located at http://www.terabeam.com or by contacting the company by telephone at 413-584-1425 or by email at IR@terabeam.com. Safe Harbor Statement Statements in this press release that are not statements of historical facts are forward-looking statements that involve risks, uncertainties, and assumptions. Terabeam Wireless' actual results may differ materially from the results anticipated in these forward-looking statements. The forward-looking statements involve risks and uncertainties that could contribute to such differences including those relating to the downturn and ongoing uncertainty in the telecommunications industry and larger economy; the intense competition in Terabeam Wireless' industries and resulting impacts on its pricing, gross margins, and general financial performance; difficulties in predicting Terabeam Wireless' future financial performance; difficulties or delays in developing and supplying new products with the contemplated or desired features, performance, cost, price, and other characteristics; difficulties in supplying products at the times and in the quantities desired by customers; risks arising from and relating to Terabeam Wireless' recent acquisition of Proxim Corporation's operations, assets, and relationships, including without limitation risks of patent infringement claims and related litigation; and the impacts and effects of any other strategic transactions Terabeam Wireless may evaluate or consummate. Further information on these and other factors that could affect Terabeam Wireless' actual results is and will be included in filings made by Terabeam Wireless from time to time with the Securities and Exchange Commission and in its other public statements. Use of Pro Forma Financial Information To supplement our consolidated financial statements presented on a GAAP basis, Terabeam Wireless has presented non-GAAP, or pro forma, measures of net loss and 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 investors a supplemental understanding of Terabeam Wireless' underlying operational results and trends. The presentation of this additional information is not meant to be considered in isolation or as a substitute for Terabeam Wireless' financial results prepared in accordance with GAAP in the United States of America. -0- *T YDI WIRELESS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) September 30, December 31, 2005 2004 --------------- ------------- (unaudited) Assets Current assets: Cash and cash equivalents $8,743 $35,368 Investment securities - available-for- sale 263 5,369 Accounts receivable, net 8,973 2,972 Refundable income taxes 0 151 Inventory 9,252 7,442 Prepaid expenses 1,131 253 --------------- ------------- Total current assets 28,362 51,555 Property and equipment, net 4,152 2,511 Other Assets: Restricted cash 5,076 5,136 Goodwill 6,663 6,072 Intangible assets, net 20,924 11,919 Deposits 388 91 --------------- ------------- Total other assets 33,051 23,218 --------------- ------------- Total assets $65,565 $77,284 =============== ============= Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $11,810 $6,965 Deferred revenue 1,673 159 Current maturities of notes payable 135 2,899 --------------- ------------- Total current liabilities 13,618 10,023 Notes payable, net of current maturities 97 1,270 --------------- ------------- Total liabilities 13,715 11,293 Commitments and contingencies Stockholders' Equity Preferred stock, $0.01 par value; authorized 4,500,000, none issued at September 30, 2005 and December 31, 2004 - - Common stock, $0.01 par value, 100,000,000 shares authorized, 21,408,910 issued and outstanding at September 30, 2005 and 22,845,847 issued with 22,345,847 outstanding at December 31, 2004 214 228 Additional paid-in capital 56,580 59,637 Retained earnings (4,933) 7,277 Treasury stock 0 (1,155) Accumulated other comprehensive income: Net unrealized gain (loss) on available-for-sale securities (11) 4 --------------- ------------- Total stockholders' equity 51,850 65,991 --------------- ------------- Total liabilities and stockholders' equity $65,565 $77,284 =============== ============= YDI WIRELESS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) For the Three For the Nine Months Ended Months Ended September 30, September 30, ------------------ ------------------ 2005 2004 2005 2004 --------- -------- --------- -------- Revenues $18,147 $6,370 $31,909 $17,120 Cost of goods sold 10,503 3,682 17,509 10,426 Restructuring provision for excess and obsolete inventory 2,143 0 2,143 0 --------- -------- --------- -------- Gross profit 5,501 2,688 12,257 6,694 Operating expenses: Selling costs 3,800 879 5,831 1,799 Restructuring charges 944 0 944 0 Restructuring charge for impairment of intangible assets 4,664 0 4,664 0 General and administrative 3,342 3,381 8,627 7,288 Research and development 2,788 1,069 4,438 2,038 --------- -------- --------- -------- Total operating expenses 15,538 5,329 24,504 11,125 --------- -------- --------- -------- Operating income (loss) (10,037) (2,641) (12,247) (4,431) Other income (expenses): Interest income 122 360 612 410 Interest expense (4) (76) (140) (139) Other income (loss) 10 6 (106) 509 --------- -------- --------- -------- Total other income (expenses) 128 290 366 780 --------- -------- --------- -------- Income (loss) before income taxes (9,909) (2,351) (11,881) (3,651) Benefit (provision) for income taxes (3) 0 11 (2) --------- -------- --------- -------- Income (loss) before minority interest (9,912) (2,351) (11,870) (3,653) Minority interest in net income of Merry Fields (101) 0 (101) 0 --------- -------- --------- -------- Net income (loss) ($10,013) ($2,351) ($11,971) ($3,653) ========= ======== ========= ======== Weighted average shares - basic and diluted 21,163 26,218 21,932 18,788 --------- -------- --------- -------- EPS, basic and diluted ($0.47) ($0.09) ($0.55) ($0.19) ========= ======== ========= ======== YDI WIRELESS, INC. GAAP to Pro Forma Net Loss Reconciliation (in thousands, except per share data) (unaudited) For the Three For the Nine Months Ended Months Ended September 30, September 30, ------------------ ------------------ 2005 2004 2005 2004 --------- -------- --------- -------- GAAP net income (loss) ($10,013) ($2,351) ($11,971) ($3,653) Restructuring provision for excess and obsolete inventory 2,143 0 2,143 0 Restructuring charges relating to operating expenses: Severance for personnel 279 0 279 0 Lease reserves for unutilized facilities 665 0 665 0 Impairment for Terabeam trade name 3,600 0 3,600 0 Write-off of capitalized software development 1,064 0 1,064 0 --------- -------- --------- -------- Pro forma net income (loss) ($2,262) ($2,351) ($4,220) ($3,653) --------- -------- --------- -------- --------- -------- --------- -------- Weighted average shares - basic and diluted 21,163 26,218 21,932 18,788 --------- -------- --------- -------- Pro forma EPS, basic and diluted ($0.11) ($0.09) ($0.19) ($0.19) ========= ======== ========= ======== *T