Motorola posts $86 million Q1 loss, tops revenue estimates

Motorola posts $86 million Q1 loss

Motorola Mobility on Tuesday reported its financial results for the first quarter. The struggling vendor managed $3.08 billion in sales, narrowly topping Wall Street’s $3.03 billion revenue estimates as Motorola continued to work toward the finalization of Google’s $12.5 billion acquisition. Motorola’s loss of $0.28 per share, or $86 million, missed analysts’ consensus by a penny per share, however. Revenue from the company’s mobile division increased 3% as Motorola shipped 5.1 million smartphones in the quarter, but total device shipments slid to 8.9 million units as demand dropped following the holidays. “The introduction of RAZR MAXX marked another successful addition to the Motorola product family and contributed to our growth in smartphones,” Motorola Mobility CEO Sanjay Jha said. “Our Home business delivered another solid quarter highlighted by improvement in year-over-year profitability. We continue to work closely with Google to complete the proposed merger during the first half of the year.” Motorola’s full press release follows below.

Motorola Mobility Announces First Quarter Financial Results

LIBERTYVILLE, Ill., May 1, 2012 /PRNewswire/ –

First Quarter Financial Highlights

  • Net revenues of $3.1 billion
  • Non-GAAP net loss of $0.03 per share compared to net loss of $0.08 per share in first quarter 2011; GAAP net loss of $0.28 per share compared to net loss of $0.27 per share in first quarter 2011
  • Mobile Devices net revenues of $2.2 billion; Non-GAAP operating loss of $85 million; GAAP operating loss of $121 million
  • Shipped 8.9 million mobile devices, including 5.1 million smartphones
  • Home net revenues of $884 million; Non-GAAP operating earnings of $91 million; GAAP operating earnings of $68 million

Click here for printable press release and financial tables.

Motorola Mobility Holdings, Inc. (NYSE: MMI) today reported net revenues of $3.1 billion in the first quarter of 2012, up 2 percent compared to the first quarter of 2011. The GAAP net loss in the first quarter of 2012 was $86 million, or $0.28 per share, compared to a net loss of $81 million, or $0.27 per share, in the first quarter of 2011. On a non-GAAP basis, the net loss in the first quarter 2012 was $10 million, or $0.03 per share, compared to a net loss of $25 million, or$0.08 per share, in the first quarter of 2011.

The Company had operating cash outflow of $98 million in the first quarter. Total cash at the end of the quarter was $3.5 billion and includes cash, cash equivalents, and cash deposits.

Details on non-GAAP adjustments and the use of non-GAAP measures are included later in this press release and in the financial tables.

“The introduction of RAZR™ MAXX marked another successful addition to the Motorola product family and contributed to our growth in smartphones. Our Home business delivered another solid quarter highlighted by improvement in year-over-year profitability,” said Sanjay Jha, chairman and chief executive officer, Motorola Mobility. “We continue to work closely with Google to complete the proposed merger during the first half of the year.”

Operating Results

Mobile Devices net revenues in the first quarter were $2.2 billion, up 3 percent compared with the year-ago quarter. The GAAP operating loss was $121 million compared to an operating loss of $89 million in the year-ago quarter. The non-GAAP operating loss was $85 million compared to an operating loss of$61 million in the year-ago quarter. The Company shipped a total of 8.9 million mobile devices in the first quarter, including 5.1 million smartphones.

Mobile Devices highlights:

  • Launched RAZR™ MAXX, the longest-lasting 4G LTE smartphone, allowing customers to talk for over 21 hours on a single charge, and DROID 4 by Motorola, the thinnest and most powerful 4G LTE QWERTY smartphone.
  • Expanded budget-friendly smartphone portfolio in China, Europe, and Latin America with the introduction of MOTOLUXE, a slim touchscreen device and Motorola DEFY MINI, the ideal “life proof” device for the active consumer.
  • Teamed up with Bubba Watson, four time PGA Tour winner, including the 2012 Masters  to introduce MOTOACTV Golf Edition, a cutting-edge GPS golf tracker, virtual caddy and online clubhouse.

Home segment net revenues in the first quarter were $884 million, down 2 percent compared with the year-ago quarter. GAAP operating earnings improved to$68 million, compared to $53 million in the year-ago quarter. Non-GAAP operating earnings were $91 million compared to $81 million in the year-ago quarter.

Home highlights:

  • Introduced Connected Home Gateway, the industry’s first plug-and-play solution for home monitoring and control services.
  • Provided equipment and services to Asian Broadcasting Network for launch of Malaysia’s most advanced digital cable TV network.
  • Industry recognition of our Medios multi-screen software portfolio including SecureMedia® named “Best Rights and Asset Management Solution” at 2012 IPTV World Forum.
  • Announced global distributor and integrator agreement with Edgecast’s Content Delivery Network platform, enabling advanced multi-screen service delivery to consumers.

Merger Update

As previously announced on August 15, 2011, Motorola Mobility and Google Inc. (“Google”) (NASDAQ: GOOG) entered into a definitive agreement for Google to acquire Motorola Mobility for $40.00 per share in cash, or a total of approximately $12.5 billion.

Motorola Mobility and Google continue to work closely with the authorities in China for approval on the acquisition. The transaction has been investigated and cleared without conditions in all other jurisdictions with pre-closing clearance requirements. We continue to expect the transaction to close during the first half of 2012.

For more information on the proposed merger, please visit http://investors.motorola.com.

Conference Call and Webcast
In light of the pending acquisition of the Company by Google, the Company does not conduct a financial analyst conference call or webcast following the release of its earnings information nor provide financial guidance. To access the first quarter results and other financial information, please visithttp://investors.motorola.com.

Consolidated GAAP Results
A comparison of results from operations is as follows:

First Quarter
(In millions, except per share amounts) 2012 2011
Net revenues $3,078 $3,032
Gross margin 754 755
Operating loss (70) (36)
Loss before income taxes (69) (51)
Net loss ($86) ($81)
Basic loss per common share ($0.28) ($0.27)
Diluted loss per common share ($0.28) ($0.27)
Weighted average common shares outstanding
    Basic 302.4 294.7
    Diluted 302.4 294.7

Non-GAAP Adjustments for first quarter 2012 and 2011

First Quarter
Per Share Impact 2012 2011
GAAP Loss per Common Share ($0.28) ($0.27)
Merger-related costs * 0.06 ——
Stock-based compensation expense 0.16 0.14
Intangible assets amortization expense 0.04 0.05
Total Non-GAAP Adjustments ** 0.25 0.19
Non-GAAP Loss per Common Share ($0.03) ($0.08)

Definitions

*  Merger-related costs primarily consisting of legal and banking fees.

** Earnings or loss per share (EPS) impact may not add up due to rounding.

Use of Non-GAAP Financial Information
In addition to the GAAP results included in this presentation, Motorola Mobility also has included non-GAAP measurements of results. Motorola Mobility has provided these non-GAAP measurements to help investors better understand Motorola Mobility’s core operating performance, enhance comparisons of Motorola Mobility’s core operating performance from period to period, and allow better comparisons of Motorola Mobility’s operating performance to that of its competitors. Among other things, the Company’s management uses these operating results, excluding the identified items, to evaluate the performance of its businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results, excluding these items, because it believes this measurement enables it to make better period-to-period evaluations of the financial performance of its core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the Company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP.

Non-GAAP adjustments are comprised of the following items:

Merger-related costs: The Company has excluded the effects of merger-related costs from its non-GAAP operating expenses and net income measurements because the Company believes that this item does not reflect expected future operating earnings or expenses and do not contribute to a meaningful evaluation of the Company’s current operating performance or comparisons to the Company’s past operating performance.

Stock-based compensation expense: The Company has excluded stock-based compensation expense from its non-GAAP operating expenses and net income measurements. Although stock-based compensation is a key incentive offered to our employees and the Company believes such compensation contributed to the revenue earned during the periods presented and also believes it will contribute to the generation of future period revenues – the Company continues to evaluate its performance excluding stock-based compensation expense primarily because it represents a significant non-cash expense. Stock-based compensation expense will recur in future periods.

Intangible assets amortization expense: The Company has excluded intangible assets amortization expense from its non-GAAP operating expenses and net income measurements, primarily because it represents a significant non-cash expense and because the Company evaluates its performance excluding intangible assets amortization expense. Amortization of intangible assets is consistent in amount and frequency but is significantly affected by the timing and size of the Company’s acquisitions. Investors should note that the use of intangible assets contributed to the Company’s revenues earned during the periods presented and will contribute to the Company’s future period revenues as well. Intangible assets amortization expense will recur in future periods.

Details of the above non-GAAP adjustments and reconciliations of the non-GAAP measurements to the corresponding GAAP measurements can be found in the financial tables.

Business Risks

Motorola Mobility cautions the reader that this communication includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements include, but are not limited to, the expected closing date of the proposed Google transaction and the expected timeframe for regulatory decisions. Forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements including, but not limited to, the ability of the parties to consummate the proposed transaction and the satisfaction of the conditions precedent to consummation of the proposed transaction, including the ability to secure regulatory and other approvals at all or in a timely manner; and the other risks and uncertainties contained and identified in Motorola Mobility’s filings with the Securities and Exchange Commission (the “SEC”), any of which could cause actual results to differ materially from the forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. Motorola Mobility undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

 

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