Palm Reports Q1 FY 2010 Results
Palm, Inc. today reported that total revenues in the first quarter of fiscal year 2010, ended Aug. 28, 2009, were $68.0 million. Gross profit was ($2.8) million, and gross margin was (4.1) percent. These results include the effects of subscription accounting applied to Palm webOS products as required by GAAP. In accordance with this methodology, revenues and direct cost of revenues for Palm webOS products (currently Palm Pre smartphone) are deferred and recognized over the product's estimated economic life.
"We're making significant progress with Palm's transformation, and our culture of innovation is stronger than ever. We're launching more great Palm webOS products with more carriers, and turning our sights toward growth," said Jon Rubinstein, chairman and chief executive officer.
To facilitate comparisons to Palm's historical results, Palm has included non-GAAP adjusted measures, which exclude the impact of subscription accounting, stock-based compensation and other items detailed later in this release. The company believes this information will help investors better evaluate its current period performance and trends in its business.
Non-GAAP Adjusted Revenues in the first quarter totaled $360.7 million, non-GAAP Adjusted Gross Profit was $100.6 million and non-GAAP Adjusted Gross Margin was 27.9 percent.
The company shipped a total of 823,000 smartphone units during the quarter, representing a 134 percent increase from the fourth quarter of fiscal year 2009 and a year-over-year decrease of 30 percent. Smartphone sell-through for the quarter was 810,000 units, up 76 percent from the fourth quarter of fiscal year 2009 and down 21 percent year-over-year.
On a GAAP basis, net loss applicable to common stockholders for the first quarter of fiscal year 2010 was $(164.5) million, or $(1.17) per diluted common share. This compares to a net loss applicable to common stockholders for the first quarter of fiscal year 2009 of $(41.9) million, or $(0.39) per diluted common share.
The company's net loss applicable to common stockholders on a GAAP basis reflects new accounting guidance, effective this quarter, which requires the anti-dilutive provisions of Palm's series C preferred shares and related warrants to be treated as derivatives for financial reporting purposes. The fair value of the derivatives were estimated as of the first day of fiscal year 2010 and are marked to market on a quarterly basis, with any change in value reflected in the company's financial results for the period. As of Aug. 28, 2009, Palm recorded a $235.0 million current liability related to its series C derivatives. A $27.4 million non-cash loss on series C derivatives was reflected in the company's financial results. With regard to the series C derivatives, any future increases in Palm's stock price from period to period will be reflected as a non-cash loss on these derivatives in the company's financial results, and any future decreases will be reflected as a non-cash gain in the company's financial results.
Non-GAAP Net Loss for the first quarter of fiscal year 2010 was $(13.6) million, or $(0.10) per diluted share. This compares to a non-GAAP Net Loss for the first quarter of fiscal year 2009 of $(12.8) million, or $(0.12) per diluted share.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the first quarter of fiscal year 2010 totaled $(149.2) million. EBITDA, adjusted to exclude the impact of subscription accounting, stock-based compensation, net other income (expense), restructuring charges (adjustments), an impairment of non-current auction rate securities and a loss on series C derivatives, or Adjusted EBITDA, totaled $(2.0) million.
The company's cash, cash equivalents and short-term investments balance was $211.8 million at the end of the first quarter of fiscal year 2010. Cash used in operations for the first quarter of fiscal year 2010 was $45.1 million.
Palm's quarterly operating results are, and will continue to be, significantly impacted by the timing and size of product launches. The company's non-GAAP first quarter results reflected the scale of the launch of Palm Pre with Sprint at the beginning of the quarter and the subsequent launch of Palm Pre with Bell Mobility in Canada. Due to the timing and scale of expected product launches in Palm's second fiscal quarter compared to those which took place in Palm's first fiscal quarter, and due to lower anticipated demand for legacy products, the company expects non-GAAP Adjusted Revenues for its second quarter of fiscal year 2010 to be between $240 million and $270 million.
The company's planned product launches with additional carriers in the second half of its fiscal year, together with continuing sales from products launched in the first half of its fiscal year, are expected to yield stronger operating performance, resulting in non-GAAP Adjusted Revenues for fiscal year 2010 of $1.6 billion to $1.8 billion.
Source: Palm Inc. Press Release.