Ruckus Wireless Inc. Earnings Disappoint As Large Clients Delay Deals

A Ruckus Wireless executive playing to the crowd at a recent conference in Rome Credit: Ruckus Wireless via Facebook.

Shares of Ruckus Wirelessstock were down 4.11% at 5:46 p.m. ET on Thursday evening, after the company posted first-quarter revenue and earnings that came short of estimates. Here's a closer look at the final totals versus Wall Street's projections:

RKUS Revenue YOY Growth EPS YOY Growth
Consensus estimate $85.62 million 14.1% $0.08 60%
Q1 actuals $82.08 million 9.4% $0.07 40%
DIFFERENCE ($3.54 million) (4.7%) ($0.01) (20%)

Sources: S&P Capital IQand Ruckus Wireless press release.

Commenting on the results, CEO Selina Lo said in a press release:

What went right: Financially, Ruckus didn't have much to celebrate. New products and relationships are aimed at changing that. In addition to the potential upside from E-Rate, in its press release Ruckus touted a forthcoming partnership withNokia The company's802.11ac technology will be integrated into Nokia Networks' "Flexi Zone" small cell indoor and outdoor wireless products.

What went wrong:As Lo says in her statement, big deals were delayed as clients took longer to make purchases. That's not necessarily a bad thing, but it's also a common problem for companies like Ruckus, which rely on large, long-term deals that include developing and laying an infrastructure. Cash can get consumed quickly when contracts go unsigned. In this case, Ruckus burned through $5.3 million in cash to fund first-quarter operations. Last year, the company generated $3.6 million in operating cash flow.

What's next:Looking ahead, Ruckus Wireless projects $86 million to $91 million in second-quarter revenue, resulting in $0.07 to $0.10 in net income per share after excluding the impact of stock-based compensation and other one-time and non-cash charges.

Analysts tracked by S&P Capital IQ have the company generating $90.72 million in revenue and $0.10 a share in adjusted profit, versus $81 million and $0.07 a share in last year's Q2. Longer term, analysts have Ruckus Wireless growing earnings by an average of 22.57%annuallyduring the next three to five years.

And in terms of the overall business? Investors should keep a close eye on education spending. Ruckus has hinged much of its immediate future on the success of the E-Rate program for bringing fast wireless service to schools and libraries.

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