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Alvarion Again Achieves Record Results for the Third Quarter of 2004; Revenues Up 7%, Net Income Increased 47% Sequentially TEL AVIV, Israel --(Business Wire)-- Nov. 3, 2004 -- Alvarion Ltd. (NASDAQ: ALVR), the leading provider of wireless broadband solutions worldwide, today announced financial results for the third quarter ended September 30, 2004.Revenues for the third quarter of 2004 rose to a record $52.2 million, an increase of 7% compared to $48.8 million in the second quarter of 2004, and up 52% from $34.3 million in the third quarter of 2003. Gross margin increased for the 12th consecutive quarter, reaching 44.3% compared to 43.2% in the second quarter of 2004 and 41.1% in the third quarter of 2003. According to US GAAP, net income increased to $3.7 million or $0.06 per share on a fully diluted basis for the third quarter of 2004. GAAP net income for the second quarter of 2004 was $2.5 million, or $0.04 per share on a fully diluted basis, and GAAP net loss for the third quarter of 2003 was $(2.1) million, or $(0.04) per share. Revenues for the first 3 quarters of 2004 totaled to $145.6 million, an increase of 66% compared with revenues of $87.7 million in the same period in 2003. During the first 3 quarters of 2004, net income totaled to $7.6 million compared to a net loss of $(11.9) million in the same period of 2003. Results for all periods include expenses attributable to the amortization of intangible assets and amortization of deferred stock compensation, which totaled $680,000 in the second and third quarters of 2004, and $790,000 in the third quarter of 2003. Excluding all aforementioned amortizations, the Company's non-GAAP net income for the third quarter of 2004 was $4.4 million, or $0.07 per diluted share. For the second quarter of 2004 non-GAAP net income was $3.2 million, or $0.05 per diluted share, and for the third quarter of 2003 non-GAAP net loss was $(1.3) million, or $(0.02) per share. The Company generated $6.3 million in cash provided by operating activities in the third quarter and the balance sheet remained very strong with its cash position reaching a record $170 million at September 30, 2004. DSO was a record low of 35 days. Comments of Management "Both technological and market leadership combined with strong execution led to another outstanding quarter for the company," said Zvi Slonimsky, CEO of Alvarion. "Once again we achieved improvement in all financial measurements. "We are continuing to enhance our position as the leader in both broadband wireless access and the adoption of the WiMAX standard. Our broad-based growth in Q3 again reflected the increase in worldwide demand for wireless broadband solutions. We also continue to see a high degree of interest in the WiMAX standard. We were extremely gratified by the outstanding customer response to the BreezeMAX 3500, our new WiMAX-ready system. Exemplifying the strong response were two new BreezeMAX customers announced recently - Altitude Telecom, an independent operator in France planning a nationwide WiMAX network, and MobileCity, which is deploying the first WiMAX-ready network in Scandinavia. During Q3, we received the first sample chips from Intel for the standard CPE. We are pleased with the progress that Intel is making and we are on track for having an Intel-based CPE in the market by mid-year 2005. "During the third quarter, we continued to see strong demand for all product groups from operators around the world. We were pleased by the follow-on orders from existing Tier 1 incumbent carriers in Latin America, Europe, South Africa, and China," continued Mr. Slonimsky. "We expect these regions to continue to be sources of strong growth going forward. On October 16, 2004, we amended the amalgamation agreement with interWAVE Communications International Ltd., a leading supplier of compact cellular network infrastructure based on GSM and CDMA2000 technology that is particularly well-suited for rural areas in developing regions. We are currently awaiting approval of the deal by interWAVE shareholders and, once completed, this acquisition will complement our existing wireless solutions with a cost effective fixed and mobile solution to serve the need for voice and data in regions of the world that need telecommunication infrastructure. We intend to apply our experience in integrating acquisitions to realize the benefits of the combined company," concluded Mr. Slonimsky. Q4 2004 Guidance The Company expects Q4 2004 revenues to range between $54 million and $56 million. At this revenue range, net earnings per share are expected to range between 7 and 8 cents while non-GAAP net earnings per share, which excludes amortization of intangible assets and deferred stock-based compensation, is expected to range between 8 and 9 cents. The fourth quarter guidance also excludes any impact on results of operations and any one time transaction-related charges associated with the acquisition of interWAVE Communications International Ltd., which the company hopes to close by the end of Q4. Alvarion's management will host a conference call today, November 3, 2004, at 9:00 a.m. Eastern Time to discuss the quarter's results. To participate in the call, please dial one of the following numbers approximately five minutes prior to the scheduled start time: USA: (480) 629-9034; International: +1-480-629-9034. The public is invited to listen to the live webcast of the conference call. For details please visit Alvarion's website at www.alvarion.com. An archive of the on-line broadcast will be available on the website. A replay of the call will be available from 2:15 p.m. EDT on November 3, 2004 through 11:59 p.m. EDT on November 10, 2004. To access the replay, please call USA: (320) 365-3844, International: +1-320-365-3844. To access the replay, users will need to enter the following code: 750667. About Alvarion With more than 2 million units deployed in 130 countries, Alvarion is the worldwide leader in wireless broadband providing systems to carriers, ISPs and private network operators. Leading the WiMAX revolution, Alvarion has the most extensive deployments and proven product portfolio in the industry covering the full range of frequency bands. Alvarion's products enable the delivery of business and residential broadband access, corporate VPNs, toll quality telephony, mobile base station feeding, Hotspot coverage extension, community interconnection, and public safety communications. Alvarion works with several top OEM providers and over 200 local partners to support its diverse global customer base in solving their last-mile challenges. As a wireless broadband pioneer, Alvarion has been driving and delivering innovations for over 10 years from core technology developments to creating and promoting industry standards. Leveraging its key roles in the IEEE and HiperMAN standards committees and experience deploying OFDM-based systems, the company's prominent work in the WiMAX Forum(TM) is focused on increasing widespread adoption of standards-based products in the wireless broadband market. For more information, visit Alvarion's World Wide Web site at www.alvarion.com. This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations or beliefs of Alvarion's management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward -looking statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: inability to further identify, develop and achieve success for new products, services and technologies; increased competition and its effect on pricing, spending, third-party relationships and revenues; as well as the in ability to establish and maintain relationships with commerce, advertising, marketing, and technology providers and other risks detailed from time to time in filings with the Securities and Exchange Commission. In addition, our limited history in completing acquisitions may adversely impact our ability to successfully integrate the business of Alvarion and interWAVE; we may face liabilities and expenses in excess of those currently anticipated with respect to the acquisition of interWAVE; and we may be unable to retain key personnel of interWAVE. In addition, if interWAVE does not receive required shareholder approvals or either company fails to satisfy other conditions to closing, the transaction will not be consummated. Factors affecting interWAVE's business generally include those set forth in interWAVE's filings with the SEC, including its Annual Report on Form 10-K for its most recent fiscal year and its most recent Quarterly Report on Form 10-Q and its Current Reports on Form 8-K. Certain information set forth in this press release pertaining to third parties has not been independently verified by Alvarion and is based solely on publicly available information or on information provided to Alvarion by such third parties for inclusion in this press release. The web sites appearing in this press release are not and will not be included or incorporated by reference in any filing made by Alvarion with the Securities and Exchange Commission, which this press release will be a part of. You may request Alvarion's future press releases or a complete Investor Kit by contacting Carmen Deville, Investor Relations: [email protected] or +1 760-517-3188. -0- *T ALVARION LTD. CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands September December 30, 31, 2004 2003 --------- -------- ASSETS Cash, cash equivalents, short-term and long-term investments $ 169,928 $153,616 Trade receivables 20,047 21,199 Other accounts receivable 9,662 4,499 Inventories 35,678 36,981 Severance pay fund 6,496 5,493 Long-term receivables 460 834 PROPERTY AND EQUIPMENT, NET 10,838 11,939 GOODWILL AND OTHER INTANGIBLE ASSETS 48,389 50,396 --------- -------- TOTAL ASSETS $ 301,498 $284,957 ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Trade payables $ 15,081 $ 23,780 Other accounts payable and accrued expenses 38,837 27,959 --------- -------- Total current liabilities 53,918 51,739 LONG TERM LIABILITIES 3,484 5,248 ACCRUED SEVERANCE PAY 8,892 7,768 --------- -------- TOTAL LIABILITIES 66,294 64,755 SHAREHOLDERS' EQUITY 235,204 220,202 --------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 301,498 $284,957 ========= ======== ALVARION LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands (except per share data) Nine Nine Three Three Three Months Months Months Months Months Ended Ended Ended Ended Ended September September September September June 30, 30, 30, 30, 30, ----------------------------------------------- 2004 2003 2004 2003 2004 --------- --------- --------- --------- ------- Sales $ 145,629 $ 87,712 $ 52,178 $ 34,291 $48,772 Cost of sales 82,413 52,347 29,049 20,181 27,710 --------- --------- --------- --------- ------- Gross profit 63,216 35,365 23,129 14,110 21,062 --------- --------- --------- --------- ------- Operating expenses: Research and development, net 20,218 17,416 6,744 6,132 6,860 Selling and marketing 29,036 23,992 10,543 8,684 9,506 General and administrative 7,019 4,583 2,412 1,729 2,367 Amortization of intangibles 2,007 1,900 669 650 669 Amortization of deferred stock compensation 33 420 11 140 11 Acquisition related expenses - 2,201 - - - --------- --------- --------- --------- ------- Total Operating expenses 58,313 50,512 20,379 17,335 19,413 --------- --------- --------- --------- ------- Operating income (loss) 4,903 (15,147) 2,750 (3,225) 1,649 Financial income, net 2,702 3,254 920 1,162 850 --------- --------- --------- --------- ------- Net Income (loss) $ 7,605 $ (11,893)$ 3,670 $ (2,063)$ 2,499 --------- --------- --------- --------- ------- Basic earnings (loss) per share $ 0.14 $ (0.23)$ 0.06 $ (0.04)$ 0.04 ========= ========= ========= ========= ======= Weighted average number of shares used in computing basic earnings (loss) per share 56,190 51,759 56,885 52,254 56,488 ========= ========= ========= ========= ======= Diluted earnings (loss) per share $ 0.12 $ (0.23)$ 0.06 $ (0.04)$ 0.04 ========= ========= ========= ========= ======= Weighted average number of shares used in computing diluted earnings (loss) per share 63,598 51,759 63,837 52,254 63,651 ========= ========= ========= ========= ======= ALVARION LTD. DISCLOSURE OF NON-US GAAP NET INCOME (LOSS) U.S. dollars in thousands (except per share data) Nine Nine Three Three Three Months Months Months Months Months Ended Ended Ended Ended Ended September September September September June 30, 30, 30, 30, 30, --------- --------- --------- --------- ------- 2004 2003 2004 2003 2004 --------- --------- --------- --------- ------- Net Income (loss) according to US GAAP $ 7,605 $ (11,893)$ 3,670 $ (2,063)$ 2,499 Amortization of intangibles 2,007 1,900 669 650 669 Amortization of deferred stock compensation 33 420 11 140 11 Acquisition related expenses - 2,201 - - - --------- --------- --------- --------- ------- Net Income (loss), excluding amortization of intangibles and deferred stock compensation and acquisition related expenses $ 9,645 $ (7,372)$ 4,350 $ (1,273)$ 3,179 ========= ========= ========= ========= ======= Basic net earnings (loss) per share, excluding amortization of intangibles and deferred stock compensation and acquisition related expenses $ 0.17 $ (0.14)$ 0.08 $ (0.02)$ 0.06 ========= ========= ========= ========= ======= Weighted average number of shares used in computing basic net earnings (loss) per share 56,190 51,759 56,885 52,254 56,488 ========= ========= ========= ========= ======= Diluted net earnings (loss) per share, excluding amortization of intangibles and deferred stock compensation and acquisition related expenses $ 0.15 $ (0.14)$ 0.07 $ (0.02)$ 0.05 ========= ========= ========= ========= ======= Weighted average number of shares used in computing diluted net earnings (loss) per share 63,598 51,759 63,837 52,254 63,651 ========= ========= ========= ========= ======= ALVARION LTD. CONSOLIDATED STATEMENT OF CASH FLOWS U.S. dollars in thousands Three Months ended September 30, --------- Cash flows from operating activities: Net Income $ 3,670 Adjustments to reconcile net income to net cash used by operating activities: Depreciation 1,557 Amortization of deferred stock compensation 11 Unrealized gain from derivative financial instruments 58 Amortization of intangibles 669 Increase in trade receivables (338) Decrease in other accounts receivable and prepaid expenses 955 Increase in inventories (52) Decrease in trade payables (1,019) Decrease in Long term receivables 272 Increase in other accounts payables and accrued expenses 520 Accrued severance pay, net 1 --------- Net cash provided by operating activities 6,304 Cash flows from investing activities: Purchase of fixed assets (970) Cash and cash equivalents used for the acquisition of interWAVE (3,247) --------- Net cash used in investing activities (4,217) Cash flows from financing activities: Proceeds from exercise of employees' stock options, net of expenses 232 --------- Net cash provided by financing activities 232 --------- Increase in cash, cash equivalents, short-term and long- term investments 2,319 Cash, cash equivalents, short-term and long-term investments at the beginning of the period 167,609 --------- Cash, cash equivalents, short-term and long-term investments at the end of the period $ 169,928 ========= *T |
