Brightpoint Beats, Trims Outlook

Brightpoint Inc. (CELL) declared solid financial results for the fourth quarter of 2011, beating the Zacks Consensus Estimates. However, management reduced its prior financial outlook for fiscal 2012 due to stronger than normal seasonality in the ensuing first quarter and a broader global macro-economic volatility.

Quarterly total revenue was $1,556.4 million, an improvement of 39% year over year and 16% sequentially. This was also significantly above the Zacks Consensus Estimate of $1,410 million. In the fourth quarter of 2011, the company managed 30.710 million wireless devises (including 0.8 million tablets), up 6% year over year and 13% sequentially.

This was a quarterly record for Brightpoint. This fabulous performance was primarily attributable to a massive growth in Distribution business, backed by increasing demand for smartphones and tablets, which have higher average selling prices and an improvement in supply-chain management system.

Quarterly GAAP net income from continuing operations was $15.1 million or 22 cents per share compared with a net income of $15.9 million or 22 cents per share in the prior-year quarter. However, adjusted (excluding special items) EPS in the reported quarter was 31 cents, beating the Zacks Consensus Estimate of 30 cents.

Segment wise, Distribution revenue was $1,415.8 million in the fourth quarter of 2011 compared with $1,022.1 million in the year-ago quarter. Logistics Services revenue was $140.6 million compared with $98.2 million in the prior-year quarter.

In the reported quarter, on a GAAP basis, gross margin was 6.5% compared with 8.5% in the prior-year quarter. SG&A expenses were $70 million compared with $62.3 million in the year-ago quarter. QuarterlyEBITDA came in at $34.9 million compared with $30.6 million in the year-ago quarter.

During fiscal 2011, Brightpoint used approximately $81 million of cash for operations compared with a cash generation of $160.4 million in the year-ago period. Free cash flow (cash flow from operation less capital expenditure) in fiscal 2011 was a negative $141.3 million compared with $118.3 million in fiscal 2010.

At the end of fiscal 2011, Brightpoint had $40.8 million of cash & marketable securities on its balance sheet compared with $41.7 million at the end of 2010. Total debt was $253 million at the end of fiscal 2011 compared with $90.4 million at the end of 2010. Debt-to-capitalization ratio, at the end of fiscal 2011, was 0.46 compared with 0.29 at the end of 2010.

Future Financial Outlook

Management reduced its previous guidance for fiscal 2012. The new GAAP EPS will be within the range of 66 cents to 76 cents compared with 67 cents to 79 cents estimated earlier. The updated non-GAAP EPS will be within the range of $1.07 to $1.17 compared with $1.08 to $1.20 estimated earlier. For fiscal 2012, estimated distribution gross margin is within the range of 3.6% to 4.0% and logistic services gross margin came in at 35% and 40%.

Recommendation

We believe the long-term business prospect of Brightpoint remains intriguing buoyed by the growing demand for high-end pocket digital assistances globally.In our view, the termination of the proposed merger between AT&T Inc. (T - Analyst Report) and T-Mobile USA is a major relief for Brightpoint as this deal had the potential to push the company’s high-margin logistic businesses in danger. We thus maintain our long-term Outperform recommendation on Brightpoint. Currently, it holds a short-term Zacks #3 (Hold) Rank on the stock.