SUNNYVALE, Calif., Dec. 22 /PRNewswire-FirstCall/ -- PalmSource, Inc.
(Nasdaq: PSRC) provider of Palm OS(R), a leading operating system powering
next generation mobile devices and smartphones, today reported revenues of
$16.8 million for the second quarter of fiscal year 2004, ended
November 28, 2003, representing an increase of 13% over $14.8 million revenue
reported for the same quarter of fiscal year 2003.
Based on generally accepted accounting principles (GAAP), the net loss for
the second quarter of fiscal year 2004 was $9.1 million or $0.89 per share.
This compares to a GAAP net loss for the second quarter of fiscal year 2003 of
$8.3 million or $0.83 per share.
On a non-GAAP basis that excludes the effect of stock-based compensation,
amortization of intangible assets, restructuring, and separation (related to
the spin out of PalmSource from palmOne), net loss for the second quarter of
fiscal year 2004 was $0.3 million, or $0.03 per share. This compares to a
non-GAAP net loss for the second quarter of fiscal year 2003 of $6.0 million
or $0.60 per share.
At November 28, 2003, cash, cash equivalents and restricted investments
were $35.7 million.
"The second quarter was an exciting and historical time for PalmSource. In
this quarter, PalmSource was spun out from palmOne and launched as an
independent public company with the mission of powering the next generation of
smart mobile devices," said David Nagel, PalmSource, Inc. president and chief
executive officer. "As these exciting events were occurring, we maintained our
focus on operational excellence and continued with the execution of our plan
to achieve profitability."
In the second quarter, the company announced PerComm, Inc. as a Palm OS
licensee. PerComm plans to integrate Palm OS 5 to create new smart mobile
devices that operate on wireless networks including ReFLEX, GSM and CDMA.
Additionally, the company recently announced that Founder Technology Group,
Corp. (Foundertech), a leading computer manufacturer in China, has licensed
Palm OS to distribute Foundertech-branded Palm Powered devices in China.
During the second quarter, the company launched the Palm Powered Mobile World
program, connecting mobile operators, infrastructure providers and software
developers in a wireless ecosystem that capitalizes on the growing smartphone
market. The Palm Powered Mobile World program was joined by Sprint as a
charter carrier member and Pumatech and Visto as charter infrastructure
members.
Second Quarter Operational Review
Comparing the second quarter of fiscal year 2004 to the same quarter of
the prior year:
-- Total revenues grew by 13% to $16.8 million.
-- License and royalty revenues increased by 14% to $15.5 million, while
the number of units shipped decreased by 10% to 1.3 million.
-- Gross margin percentage improved from 81% to 94%.
-- Total operating expenses on a non-GAAP basis decreased by 9%.
-- Non-GAAP net loss decreased by 95% to $0.3 million.
Business Outlook
Management's current outlook for the third quarter is as follows:
-- Revenues are expected to be in the range of $21 million, plus or minus
5%.
-- Financial results on a GAAP basis are expected in the range of a net
loss of $2 million to breakeven; and on a non-GAAP basis, net income in
the range of $1 million to $3 million.
-- Cash flow used by operating activities is expected in the range of
$2 million to $4 million.
INVESTOR'S NOTE: The company will hold a conference call for the public
on December 22, 2003, at 2 p.m. Pacific/5 p.m. Eastern to discuss matters
covered in this press release. The live conference call will be available over
the Internet by logging onto the investor relations section of PalmSource's
website at http://www.palmsource.com/about/ir.html . An audio replay of the
conference call also can be accessed at the same URL beginning on December 22,
2003 no later than 4 p.m. Pacific / 7 p.m. Eastern. The webcast is also being
distributed over CCBN's Investor Distribution Network to both institutional
and individual investors through CCBN's individual investor center at
http://www.companyboardroom.com, by visiting any of the investor sites in CCBN's
Individual Investor Network or via CCBN's password-protected event management
site, StreetEvents (http://www.streetevents.com).
NON-GAAP FINANCIAL MEASURES: Non-GAAP financial measures are not prepared
in accordance with generally accepted accounting principles and may be
different from non-GAAP financial measures used by other companies. Non-GAAP
financial measures should not be considered as a substitute for, or superior
to, measures of financial performance prepared in accordance with GAAP. The
company's management refers to these non-GAAP financial measures -- such as
non-GAAP operating loss and net loss -- in making operating decisions because
they provide meaningful supplemental information regarding the company's
operational performance, including the company's ability to provide cash flows
to invest in research and development and fund acquisitions and capital
expenditures. In addition, these non-GAAP financial measures facilitate
management's internal comparisons to the company's historical operating
results and comparisons to competitors' operating results. We include these
non-GAAP financial measures in our earnings announcement because we believe
they are useful to investors in allowing for greater transparency to
supplemental information used by management in its financial and operational
decision-making. Investors are encouraged to review the reconciliation of the
non-GAAP financial measures used in this news release to their most directly
comparable GAAP financial measure as provided with the financial statements
attached to this news release.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release
contains forward-looking statements within the meaning of the federal
securities laws, including, without limitation, statements regarding the
following: operating results; products, services and the features of each;
growth and growth opportunities for the industry and market; growth and growth
opportunities for shareholder value; PalmSource's outlook; customers;
profitability; liquidity and capital resources; the handheld industry; and the
growth of the smartphone industry. These statements are subject to risks and
uncertainties that could cause actual results and events to differ materially,
including, without limitation, the following: PalmSource's ability to
anticipate demand for its software; PalmSource's licensees meeting their
obligations; PalmSource's ability to hire, retain, integrate and motivate
sufficient qualified personnel; PalmSource's ability to secure and protect its
intellectual property; risk associated with international operations;
PalmSource's ability to control and successfully manage its expenses and cash
position; fluctuations in the demand for PalmSource's existing and future
products and services and growth in PalmSource's industries and markets;
PalmSource's ability to build, maintain and benefit from strategic alliances;
PalmSource's ability to compete with existing and new competitors; possible
future price cutting or other actions by competitors; PalmSource's ability to
successfully operate as a separate independent company. A detailed discussion
of these and other risks and uncertainties that could cause actual results and
events to differ materially from such forward-looking statements is included
in PalmSource's most recent filings with the Securities and Exchange
Commission, including our Quarterly Report on Form 10-Q for the period ended
August 29, 2003. All forward-looking statements in this press release are
based on information available to us as of the date hereof, and we assume no
obligation to update these forward-looking statements.
About PalmSource
PalmSource, Inc. is the company behind Palm OS, a leading operating system
powering mobile information devices. More than 30 million Palm Powered
handhelds and smartphones have been sold to date worldwide. Industry leaders
Aceeca, AlphaSmart, Fossil, Foundertech, Garmin, GSL, HuneTec, Kyocera,
Lenovo, palmOne, PerComm, Samsung, Sony, Symbol Technologies and Tapwave
license Palm OS to create diverse mobile devices that meet unique customer
needs. Palm OS has given rise to a large community of users, enterprises,
developers and manufacturers, who together make up the Palm Economy. More
information about PalmSource is available at http://www.palmsource.com,
http://www.palmsource.co.uk , http://www.palmsource.fr ,
http://www.palmsource.de and http://www.palmsource.com.cn .
NOTE: Palm OS is a registered trademark and Palm Powered is a trademark
of Palm Trademark Holding Company, LLC. Other brands may be trademarks of
their respective owners.
PalmSource, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
November 30, November 30,
2003 2002 2003 2002
Revenues:
Related party license
and royalty $10,343 $9,843 $20,630 $19,452
Third party license
and royalty 5,174 3,786 10,680 7,853
Total license and
royalty 15,517 13,629 31,310 27,305
Related party support
and service 214 288 413 1,028
Third party support
and service 1,041 871 2,181 1,505
Total support and
service 1,255 1,159 2,594 2,533
Total revenues 16,772 14,788 33,904 29,838
Cost of revenues:
License and royalty 611 2,114 1,991 4,333
Support and service 428 626 972 1,353
Total cost of
revenues 1,039 2,740 2,963 5,686
Gross profit 15,733 12,048 30,941 24,152
Operating expenses:
Research and
development 7,933 9,770 16,726 20,392
Sales and marketing 4,488 4,267 8,898 8,313
General and
administrative 3,070 3,031 5,903 5,477
Stock-based
compensation 2,688 717 3,822 1,422
Amortization of
intangible assets 65 105 163 210
Separation costs 6,067 1,410 7,092 1,893
Total operating
expenses 24,311 19,300 42,604 37,707
Loss from operations (8,578) (7,252) (11,663) (13,555)
Interest expense (146) (120) (273) (240)
Interest and other
income (expense), net (43) (300) 38 (3,875)
Loss before income
taxes (8,767) (7,672) (11,898) (17,670)
Income tax provision 356 601 1,013 1,384
Net loss $(9,123) $(8,273) $ (12,911) $ (19,054)
Basic and diluted net
loss per share $(0.89) $(0.83) $(1.28) $(1.91)
Shares used in computing
basic and diluted net
loss per share 10,227 10,000 10,114 10,000
PalmSource, Inc.
Non-GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
November 30, November 30,
2003 2002 2003 2002
Revenues:
Related party license
and royalty $10,343 $9,843 $20,630 $19,452
Third party license
and royalty 5,174 3,786 10,680 7,853
Total license and
royalty 15,517 13,629 31,310 27,305
Related party support
and service 214 288 413 1,028
Third party support
and service 1,041 871 2,181 1,505
Total support and
service 1,255 1,159 2,594 2,533
Total revenues 16,772 14,788 33,904 29,838
Cost of revenues:
License and royalty 611 2,114 1,991 4,333
Support and service 428 626 972 1,353
Total cost of
revenues 1,039 2,740 2,963 5,686
Gross profit 15,733 12,048 30,941 24,152
Non-GAAP Operating
expenses:
Research and
development 7,933 9,770 16,726 20,392
Sales and marketing 4,488 4,267 8,898 8,313
General and
administrative 3,070 3,031 5,903 5,477
Total non-GAAP
operating expenses 15,491 17,068 31,527 34,182
Non-GAAP income (loss)
from operations 242 (5,020) (586) (10,030)
Interest expense (146) (120) (273) (240)
Interest and other
income (expense), net (43) (300) 38 (3,875)
Income tax provision 356 601 1,013 1,384
Non-GAAP net loss $(303) $(6,041) $(1,834) $ (15,529)
Basic and diluted non-GAAP
net loss per share $(0.03) $(0.60) $(0.18) $(1.55)
Shares used in computing
basic and diluted net
loss per share 10,227 10,000 10,114 10,000
Reconciliation between
GAAP net loss and
Non-GAAP net loss as
follows:
GAAP net loss $(9,123) $(8,273) $ (12,911) $ (19,054)
Stock-based compensation 2,688 717 3,822 1,422
Amortization of
intangible assets 65 105 163 210
Separation costs 6,067 1,410 7,092 1,893
Non-GAAP net loss $(303) $(6,041) $(1,834) $ (15,529)
PalmSource, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
November 30, May 31,
2003 2003
ASSETS
Current assets:
Cash and cash equivalents $34,065 $37,465
Receivable from related parties 75 5,132
Accounts receivable, net 6,677 583
Prepaids and other 2,831 1,305
Total current assets 43,648 44,485
Restricted investments 1,673 1,671
Property and equipment, net 2,885 3,419
Goodwill 52,845 52,845
Intangible assets, net 245 976
Other assets 1,089 1,211
Total assets $102,385 $104,607
LIABILITIES, REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,743 $2,868
Payable to Palm, Inc. -- 1,911
Deferred revenue 11,678 9,392
Accrued restructuring -- 349
Other accrued liabilities 8,096 9,215
Total current liabilities 26,517 23,735
Non-current liabilities:
Note payable to Palm Inc., including
accrued interest -- 20,744
Deferred revenue and other 12,733 13,848
Long-term convertible subordinated note 15,000 --
Series A redeemable convertible preferred
stock -- 20,000
Stockholders' equity:
Common stock 12 10
Additional paid-in capital 108,170 61,939
Accumulated other comprehensive income 509 448
Unamortized stock-based compensation (11,528) --
Accumulated deficit (49,028) (36,117)
Total stockholders' equity 48,135 26,280
Total liabilities, redeemable
convertible preferred stock and
stockholders' equity $102,385 $104,607
SOURCE PalmSource, Inc.
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Related links:
http://www.palmsource.com
CONTACT:
Kip E. Meintzer, Investor Relations,
+1-408-400-1909, or Kip.Meintzer@PalmSource.com, or Cynthia
Harris, Public Relations, +1-408-400-1928, or
Cynthia.Harris@PalmSource.com, both of PalmSource, Inc.
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