Option reports Third Quarter 2009 results, planned capital increase and additional cost reductions
Leuven, Belgium - October 29, 2009 - Option N.V. (EURONEXT Brussels: OPTI; OTC: OPNVY), the wireless technology company, today announces its results for the third quarter ended 30 September 2009. The financial information reported in this release is presented in Euros and has been prepared in accordance with the recognition and measurement criteria of IFRS as adopted by the European Union. The accounting policies and methods of computation followed in the attached financial statements are the same as those followed in the most recent annual financial statements.
- Third quarter revenues of EUR 35.7 million, gross margin up to 30.3%,
- EBIT of EUR -6.7 million and net result of EUR -8.4 million
- Additional restructuring with non revenue related operating expense savings of EUR 20 million
- Capital increase of approximately EUR 20 million
- Strategy to move away from commoditized hardware
Cost Reduction Plan
In March, Option announced a plan to reduce quarterly non-revenue related operating expenses of EUR 21.3 million in Q4 2008 by 20%. At the end of Q3 2009, Option had significantly exceeded this plan and has reduced quarterly operating costs by 35% to EUR 13.8 million. Continuing its operational alignment with the strategy, Option is to carry out a further cost reduction plan. The new plan envisages an additional EUR 20 million savings in operating expenses for 2010 compared to the annualized Q3 2009 run-rate. Option has the intention to proceed with the following measures to implement this plan:
- The intention to proceed a collective dismissal of 55 employees at Leuven HQ that has been communicated to the works council
- Moving further to an outsourced customization and fulfilment model in China, which will result in a shift from a fixed to variable customization cost base and materially lower inventory levels
- Selectively outsourcing non-core engineering tasks and consolidating existing R&D capabilities and facilities. In the latter respect, the core of the activities of the R&D facility at Kamp-Lintfort (Germany) will be transferred to the Leuven R&D site before year-end and the company has announced its intention to close the Kamp-Lintfort site.
- Creating a leaner and more focused sales and marketing organization
- Streamlining and simplifying operations through additional headcount reduction across all sites and further non HR-related cost reductions
Related to this additional restructuring plan, the company anticipates approximately EUR 7 million of one-off restructuring costs in Q4 2009.
Capital Increase
The Company has approved a capital increase of approximately EUR 20 million which will be used to support the costs associated with the further transformation of the Company. The Company is currently assessing different alternatives. Further details will be provided at the appropriate time.
Strategy
The strategy is to explicitly focus on a move away from commoditized hardware to a fully integrated offering for mobile broadband markets:
- For the USB modem market ('attached solutions'): a focus on delivering innovative integrated solutions based on, software, services and hardware. This is a clear shift away from commoditized hardware. This also includes a sales refocus on network operators valuing innovation, customization and flexibility and an expansion beyond operators to new types of customers such as communities, content/service providers and Mobile Virtual Network Operators.
- For embedded modules ('embedded solutions'): a shift from the simple integration of a module to offering high-value services to device manufacturers. Option is bringing these solutions to mobile internet devices (MIDs) and consumer/professional electronic devices such as e-readers, gaming consoles and digital cameras.
Other
Option announces that Chip Frederking, Vice President Sales Americas, has been promoted to Vice President Global Sales. Chip joined Option in mid 2008 and has been instrumental in its development in the US. Before joining Option, Chip worked for 20 years for Motorola where he held various sales management positions. Filip Buerms, previously Vice President Global Sales, has left the Company to pursue other opportunities.
Financial Highlights of the third quarter 2009
Total revenues for the third quarter of 2009 were EUR 35.7 million, compared to EUR 60.3 million realized in the third quarter of 2008.
- Gross margin for Q3 2009 was 30.2% of total revenues, compared to 26.6% for Q3 2008. There was, however, a substantial increase in gross margin (excluding restructuring charges) compared to Q2 2009, from 20.9% to 30.3% driven by favorable exchange rates and continuing manufacturing optimizations.
- Compared to Q3 2008, Q3 2009 operating expenses decreased by EUR 5.3 million excluding restructuring charges, from EUR 22.8 million to EUR 17.5 million. The decline is mainly due to cost reductions and lower sales related costs. Compared to Q2 2009, operating expenses (excluding restructuring charges) continued to decline from EUR 18.3 million to EUR 17.4 million.
- Quarterly EBIT amounted to EUR -6.7 million or -18.9% of total revenues compared to EUR -6.8 million or -11.2% for the corresponding period in 2008. Compared to Q2 2009, the Q3 2009 quarterly negative result from operations (EBIT excluding restructuring charges) decreased from EUR -9.7 million to EUR -6.7 million.
- Net result for Q3 2009 amounted to EUR -8.9 million, or EUR -0.22 per basic share. This compares with a net result of EUR -2.9 million, or EUR -0.07 per basic share, for Q3 2008. The Q3 2009 net result was negatively impacted by a financial result of EUR -1.6 million primarily due to the continued effect of the weakness of the US dollar against the Euro on bank accounts and remaining hedging contracts. This compares to EUR -4.5 million in Q2 2009.
- In Q3 2009, the company stopped accounting for positive tax results as the deferred taxes on the balance sheet represent 22% of the total assets. The company has determined that it is prudent to cap the deferred tax asset at this level. If a positive tax effect had been included, the net result would have improved by EUR 4.3 million to -4.7 million.
- The Group's balance sheet includes EUR 26.5 million in cash, of which EUR 10.8 million has been drawn from existing credit lines. This compares with a cash position of EUR 28.2 million as of 30 June 2009, of which EUR 7 million was from existing credit lines. The accounts payable and receivable positions decreased compared to year end 2008, and the average days outstanding on receivables for the third quarter decreased to an average of 47 days net of subcontracting parties.
Financial Highlights of the year to date result 2009
- Total year to date revenues were EUR 127.7 million, a decrease of 35.5% compared to EUR 197.9 million revenues realized during the comparable period in 2008.
- Year to date gross margin was EUR 32.3 million or 25.3% of total revenues, compared to EUR 57.7 million or 29.1% in 2008. Excluding the year to date restructuring charge of EUR 407 thousand in 2009, the gross margin would have been 25.6%.
- Year to date EBIT decreased to EUR -27.2 million or -21.3% of total revenues, including the year to date restructuring charge of EUR 1.7 million, compared to EBIT of EUR -10.3 million for the corresponding period in 2008.
- Net result decreased to EUR -25.8 million, or EUR -0.62 per basic share. This compares with a net result of EUR -5.7 million, or EUR -0.14 per basic share, in 2008. The 2009 net result was positively impacted by taxes of EUR 6.9 million and negatively impacted by a finance result of EUR -5.6 million.
For the entire press release in English or Dutch, including tables, click on the link below
Option reports Third Quarter 2009 results
Option rapporteert resultaten van het derde kwartaal 2009
Investor Relations Contact
JP Ziegler, CFO
Tel.: +32 (0)16 317 411
investor@option.com
--------------------------------------
About Option
Option, the wireless technology company, is a leading innovator in the design, development and manufacture of 3G HSUPA, HSDPA, UMTS, EDGE, and WLAN technology products for wireless connectivity solutions. Option has built up an enviable reputation for creating exciting products that enhance the performance and functionality of wireless communications. Option's headquarters are in Belgium (Leuven). The company has Research & Development in Belgium (Leuven) and Germany (Düsseldorf and Augsburg), and an ISO 9001 production engineering and logistics facility in Ireland (Cork). Option also has offices in Europe, US, Greater China, Japan and Australia. For more information please visit our brand new website www.option.com.
- Third quarter revenues of EUR 35.7 million, gross margin up to 30.3%,
- EBIT of EUR -6.7 million and net result of EUR -8.4 million
- Additional restructuring with non revenue related operating expense savings of EUR 20 million
- Capital increase of approximately EUR 20 million
- Strategy to move away from commoditized hardware
Cost Reduction Plan
In March, Option announced a plan to reduce quarterly non-revenue related operating expenses of EUR 21.3 million in Q4 2008 by 20%. At the end of Q3 2009, Option had significantly exceeded this plan and has reduced quarterly operating costs by 35% to EUR 13.8 million. Continuing its operational alignment with the strategy, Option is to carry out a further cost reduction plan. The new plan envisages an additional EUR 20 million savings in operating expenses for 2010 compared to the annualized Q3 2009 run-rate. Option has the intention to proceed with the following measures to implement this plan:
- The intention to proceed a collective dismissal of 55 employees at Leuven HQ that has been communicated to the works council
- Moving further to an outsourced customization and fulfilment model in China, which will result in a shift from a fixed to variable customization cost base and materially lower inventory levels
- Selectively outsourcing non-core engineering tasks and consolidating existing R&D capabilities and facilities. In the latter respect, the core of the activities of the R&D facility at Kamp-Lintfort (Germany) will be transferred to the Leuven R&D site before year-end and the company has announced its intention to close the Kamp-Lintfort site.
- Creating a leaner and more focused sales and marketing organization
- Streamlining and simplifying operations through additional headcount reduction across all sites and further non HR-related cost reductions
Related to this additional restructuring plan, the company anticipates approximately EUR 7 million of one-off restructuring costs in Q4 2009.
Capital Increase
The Company has approved a capital increase of approximately EUR 20 million which will be used to support the costs associated with the further transformation of the Company. The Company is currently assessing different alternatives. Further details will be provided at the appropriate time.
Strategy
The strategy is to explicitly focus on a move away from commoditized hardware to a fully integrated offering for mobile broadband markets:
- For the USB modem market ('attached solutions'): a focus on delivering innovative integrated solutions based on, software, services and hardware. This is a clear shift away from commoditized hardware. This also includes a sales refocus on network operators valuing innovation, customization and flexibility and an expansion beyond operators to new types of customers such as communities, content/service providers and Mobile Virtual Network Operators.
- For embedded modules ('embedded solutions'): a shift from the simple integration of a module to offering high-value services to device manufacturers. Option is bringing these solutions to mobile internet devices (MIDs) and consumer/professional electronic devices such as e-readers, gaming consoles and digital cameras.
Other
Option announces that Chip Frederking, Vice President Sales Americas, has been promoted to Vice President Global Sales. Chip joined Option in mid 2008 and has been instrumental in its development in the US. Before joining Option, Chip worked for 20 years for Motorola where he held various sales management positions. Filip Buerms, previously Vice President Global Sales, has left the Company to pursue other opportunities.
Financial Highlights of the third quarter 2009
Total revenues for the third quarter of 2009 were EUR 35.7 million, compared to EUR 60.3 million realized in the third quarter of 2008.
- Gross margin for Q3 2009 was 30.2% of total revenues, compared to 26.6% for Q3 2008. There was, however, a substantial increase in gross margin (excluding restructuring charges) compared to Q2 2009, from 20.9% to 30.3% driven by favorable exchange rates and continuing manufacturing optimizations.
- Compared to Q3 2008, Q3 2009 operating expenses decreased by EUR 5.3 million excluding restructuring charges, from EUR 22.8 million to EUR 17.5 million. The decline is mainly due to cost reductions and lower sales related costs. Compared to Q2 2009, operating expenses (excluding restructuring charges) continued to decline from EUR 18.3 million to EUR 17.4 million.
- Quarterly EBIT amounted to EUR -6.7 million or -18.9% of total revenues compared to EUR -6.8 million or -11.2% for the corresponding period in 2008. Compared to Q2 2009, the Q3 2009 quarterly negative result from operations (EBIT excluding restructuring charges) decreased from EUR -9.7 million to EUR -6.7 million.
- Net result for Q3 2009 amounted to EUR -8.9 million, or EUR -0.22 per basic share. This compares with a net result of EUR -2.9 million, or EUR -0.07 per basic share, for Q3 2008. The Q3 2009 net result was negatively impacted by a financial result of EUR -1.6 million primarily due to the continued effect of the weakness of the US dollar against the Euro on bank accounts and remaining hedging contracts. This compares to EUR -4.5 million in Q2 2009.
- In Q3 2009, the company stopped accounting for positive tax results as the deferred taxes on the balance sheet represent 22% of the total assets. The company has determined that it is prudent to cap the deferred tax asset at this level. If a positive tax effect had been included, the net result would have improved by EUR 4.3 million to -4.7 million.
- The Group's balance sheet includes EUR 26.5 million in cash, of which EUR 10.8 million has been drawn from existing credit lines. This compares with a cash position of EUR 28.2 million as of 30 June 2009, of which EUR 7 million was from existing credit lines. The accounts payable and receivable positions decreased compared to year end 2008, and the average days outstanding on receivables for the third quarter decreased to an average of 47 days net of subcontracting parties.
Financial Highlights of the year to date result 2009
- Total year to date revenues were EUR 127.7 million, a decrease of 35.5% compared to EUR 197.9 million revenues realized during the comparable period in 2008.
- Year to date gross margin was EUR 32.3 million or 25.3% of total revenues, compared to EUR 57.7 million or 29.1% in 2008. Excluding the year to date restructuring charge of EUR 407 thousand in 2009, the gross margin would have been 25.6%.
- Year to date EBIT decreased to EUR -27.2 million or -21.3% of total revenues, including the year to date restructuring charge of EUR 1.7 million, compared to EBIT of EUR -10.3 million for the corresponding period in 2008.
- Net result decreased to EUR -25.8 million, or EUR -0.62 per basic share. This compares with a net result of EUR -5.7 million, or EUR -0.14 per basic share, in 2008. The 2009 net result was positively impacted by taxes of EUR 6.9 million and negatively impacted by a finance result of EUR -5.6 million.
For the entire press release in English or Dutch, including tables, click on the link below
Option reports Third Quarter 2009 results
Option rapporteert resultaten van het derde kwartaal 2009
Investor Relations Contact
JP Ziegler, CFO
Tel.: +32 (0)16 317 411
investor@option.com
--------------------------------------
About Option
Option, the wireless technology company, is a leading innovator in the design, development and manufacture of 3G HSUPA, HSDPA, UMTS, EDGE, and WLAN technology products for wireless connectivity solutions. Option has built up an enviable reputation for creating exciting products that enhance the performance and functionality of wireless communications. Option's headquarters are in Belgium (Leuven). The company has Research & Development in Belgium (Leuven) and Germany (Düsseldorf and Augsburg), and an ISO 9001 production engineering and logistics facility in Ireland (Cork). Option also has offices in Europe, US, Greater China, Japan and Australia. For more information please visit our brand new website www.option.com.
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