Innovex: Fiscal 3Q08 Financial Results

Innovex, Inc. reported revenue for the fiscal 2008 third quarter ending June 28, 2008 of $16.2 million, a 22% increase over the second quarter and revenue excluding pass through material of $10.3 million, an 18% increase over the second quarter. In the fiscal 2008 second quarter, Innovex had reported revenue of $13.3 million and revenue excluding pass through material of $8.7 million.

The Company’s net loss was $4.5 million or $0.23 per share in the third quarter of fiscal 2008 as compared to a net loss of $9.2 million or $0.47 per share in the second quarter of fiscal 2008. The fiscal 2008 third quarter loss includes restructuring charges of $470,000 or $0.02 per share. The Company’s fiscal 2008 third quarter net loss excluding the restructuring charges was $4.0 million or $0.21 per share. The Company’s fiscal 2008 second quarter net loss was $8.5 million or $0.44 per share excluding restructuring charges of $700,000.

The revenue from the Company’s major customer accounts was up by 34% in the fiscal 2008 third quarter as compared to the fiscal 2008 second quarter, while growth and development accounts increased by 54% sequentially. The significant growth in revenue from the Company’s major customer accounts more than offset the reduction of revenue experienced from Flex Suspension Assembly (FSA) moving to its end of life cycle in the fiscal 2008 second quarter.

The growth in the fiscal 2008 third quarter was primarily driven by a $4 million revenue increase, or 81%, over the fiscal 2008 second quarter revenue generated from the Company’s major customer servicing the display market. The Company continues to release new products to production for this customer and market. As a result, this product line is expected to continue to experience strong growth in the near future.

"While we are pleased with the improved revenue and operational performance of the Company during the fiscal 2008 third quarter, we still are focused on returning the Company to profitability. We made significant progress in growing our display business and with the additional qualifications and tooling in place with our largest Flat Panel Display (FPD) customer, we expect them to continue to grow in future periods. We resolved the performance related issues at our new Actuator Flex Circuit (AFC) customer and began to ramp production volumes during the last two weeks of the quarter. This is an exciting development for the Company that will provide a significant additional growth opportunity for our business. As a result of our progress, we are projecting revenue and revenue excluding pass through material in the fiscal 2008 fourth quarter to grow incrementally at a higher rate than our reported growth for the fiscal 2008 third quarter," stated Terry M. Dauenhauer, Innovex’s President and Chief Executive Officer. "We continue to penetrate new markets and experience high levels of prototype activity with a number of new customers which we expect will favorably impact revenue in fiscal 2009."

While gross margins improved by 8 percentage points in the fiscal 2008 third quarter as compared to the fiscal 2008 second quarter as a result of the increased revenue, the gross margins continue to be negative. The Company expects a continued improvement in gross margins for the fiscal fourth quarter as the capacity utilization rate increases.

Cash provided by operating activities was $500,000 for the fiscal 2008 third quarter, an improvement from the $5.3 million cash used in operating activities for the fiscal 2008 second quarter. The Company’s liquidity on June 28, 2008 was $5.9 million, which is comprised of $5.6 million of cash on hand and $300,000 available under our short-term packing credit and working capital facilities. Utilization of our packing credit facility availability is dependent on presenting qualifying customer purchase orders to the banks for draw down. Capital expenditures for the fiscal 2008 third quarter were $700,000.

As previously announced, the Company completed restructuring its debt with its Thai lenders during the fiscal 2008 third quarter. The restructuring will significantly benefit the Company’s cash flow for the remainder of fiscal 2008 and fiscal 2009 by approximately $6.0 million and $9.0 million, respectively.

"We are very pleased by the support of both our Thai banking partners and our customers in working with us to improve our cash flow," stated Randy Acres, Innovex’s Chief Financial Officer. "Having completed the restructuring of the Company’s long term debt and gaining support from our customers in reducing payment terms, the Company is better positioned to fund the growth opportunities available to us."

The Company continues to explore alternatives for generating additional working capital as well as other opportunities to better leverage its assets.