Entorian Technologies Reports 2Q 2009 Financial Results

Entorian Technologies Inc., a provider of rugged, mission-critical mobile and server computing solutions for use in harsh, demanding environments, announced financial results for the second quarter ended June 30.

In a release on August 12, the company noted total revenue for the quarter was $7.7 million, which was at the high end of the company's previously stated guidance range of $5.0 million to $8.0 million. Revenue in the second quarter of 2009 consisted of $6.9 million of product revenue associated with the company's rugged technology solutions and $0.8 million of memory license revenue. This compares to total revenue of $13.0 million in the first quarter of 2009, which included product revenue of $9.5 million associated with the company's rugged technology solutions and $3.4 million from the company's memory solutions business, as well as $96,000 of license revenue. As discussed by the company previously, Entorian completed the transition of its memory solutions business in the first quarter of 2009 by transferring all manufacturing of its stacked memory products to third parties.

"The second quarter represented the final stage in transitioning our business to a rugged computing solutions provider," noted Stephan Godevais, Entorian's president and chief executive officer. "We also continued to make progress towards improving our fundamentals by lowering our cost structure. Our second quarter revenue was impacted in part by the constrained spending levels at state and local municipalities as a result of the current economic situation," stated Godevais.

Godevais further noted, "Also, our leading OEM customer successfully launched its next-generation fully rugged notebook, which has been well received by the media and customers. This new Augmentix-produced rugged product line is being positioned as one of this customer's top strategic initiatives in the coming quarters. Our strong relationship continues to evolve, creating new market opportunities for both of us."

In accordance with GAAP, gross profit for the second quarter 2009 was $1.1 million, or 14 percent of revenue, compared to 22 percent in the previous quarter. On a non-GAAP basis, gross margin was 22 percent in the second quarter of 2009, compared to 27 percent in the previous quarter.

On a GAAP basis, total operating expenses in the second quarter of 2009 were $4.9 million, compared to $7.7 million in the previous quarter. The first quarter of 2009 operating expenses included a restructuring charge of $2.3 million. SG&A represented approximately 37 percent of net revenue, including stock-based compensation expense of $272,000, compared to 25 percent in the previous quarter. R&D was approximately 27 percent of revenue, compared to 17 percent in the previous quarter. On a non-GAAP basis, total operating expenses for the quarter were $4.7 million, compared to $7.4 million in the previous quarter.

Second quarter GAAP net loss was $3.7 million, or ($0.08) per diluted share, compared to a net loss in the previous quarter of $5.0 million, or ($0.11) per diluted share.

Excluding non-cash charges for stock-based compensation, amortization and impairment of acquisition intangibles and goodwill, the non-GAAP net loss for the second quarter was $2.9 million, or ($0.06) per diluted share, compared to the non-GAAP net loss of $4.1 million, or ($0.09) per diluted share, in the previous quarter. A reconciliation of GAAP results to non-GAAP results has been provided in the financial statement tables following the text of this press release.

Cash, cash equivalents and investments on June 30, were $18.0 million, compared to $19.1 million on March 31. During the second quarter, the company repurchased approximately 80,000 shares of its common stock under its repurchase program at a cost of approximately $26,000. As of June 30, the company had approximately $6.7 million remaining under its stock repurchase plan.

Inventory as of June 30, was $4.8 million, compared to $1.9 million in the previous quarter. Accounts receivable was $11.5 million, compared to $10.7 million in the previous quarter. Capital expenditures were $336,000 and depreciation expense was $433,000.

Business Outlook

"While we expect sequential demand growth in the third quarter, due to our traditional markets' seasonality, our second generation rugged laptop is still early in its market launch and production ramp. We also remain cautious as a result of the overall economy and the uncertainty of federal, local and state government spending levels and timing. In the longer run, we have confidence in the ability of our OEM partner to gain market share," concluded Godevais.

Entorian Technologies Inc. is a provider of rugged, mission-critical mobile and server computing solutions for use in harsh, demanding environments through its subsidiary, Augmentix Corp.

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