Brightpoint Inc. (CELL) declared mixed financial results for the first quarter of 2012. However, management has reduced its prior financial outlook for fiscal 2012 due to the loss of a major client of the company’s high-margin Logistics segment in the U.S. and a broader global macro-economic volatility.

Quarterly total revenue was $1,370.1 million, an improvement of 22.9% year over year, outshining the Zacks Consensus Estimate of $1,290 million. In the first quarter of 2012, the company managed 29.194 million wireless devises (including 0.4 million tablets), up 7.2% year over year.

Quarterly GAAP net income from continuing operations was $3.1 million or 5 cents per share compared with a net income of $8 million or 12 cents per share in the prior-year quarter. However, adjusted (excluding special items) EPS in the reported quarter was 13 cents, well below the Zacks Consensus Estimate of 18 cents.

Segment wise, Distribution revenue was $1,234.3 million in the first quarter of 2012 compared with $984.7 million in the year-ago quarter. Logistics Services revenue was $135.8 million compared with $130.2 million in the prior-year quarter.

In the reported quarter, on a GAAP basis, gross margin was 6.3% compared with 7.8% in the prior-year quarter. SG&A expenses were $67 million compared with $65.7 million in the year-ago quarter. Quarterly EBITDA came in at $22.3 million compared with $26.2 million in the year-ago quarter.

During the first quarter of 2012, Brightpoint used approximately $45.4 million of cash for operations compared with $97.4 million in the year-ago quarter. Free cash flow (cash flow from operation less capital expenditure) in the first quarter of 2012 was a negative $50.9 million compared with a negative $120.2 million in the prior-year quarter.

At the end of the first quarter of 2012, Brightpoint had $25.4 million of cash & marketable securities on its balance sheet compared with $40.8 million at the end of 2011. Total debt was $296.7 million at the end of the first quarter of 2012 compared with $253 million at the end of 2011. Debt-to-capitalization ratio, at the end of the first quarter of 2012, was 0.49 compared with 0.46 at the end of 2011.

Future Financial Outlook

Management reduced its previous guidance for fiscal 2012. The new GAAP EPS will be within the range of 57 cents to 63 cents compared with 66 cents to 72 cents estimated earlier. The updated non-GAAP EPS will be within the range of 98 cents to $1.04 compared with $1.07 to $1.13 estimated earlier. For fiscal 2012, estimated distribution gross margin will be within the range of 3.4% to 4.0% and logistic services gross margin will be between 32% and 38%.

Recommendation

In early 2012, Brightpoint suffered a major blow when one of its major customers in the U.S. decided to terminate its existing contract with the company from April 2012. This customer will complete its transition to a new vendor by the end of 2012. Brightpoint managed 6.8 million wireless devices for this particular client in 2011. Nevertheless, the company has agreements with large telecom equipment and services corporations, such as Research In Motion Ltd. (RIMM), HTC Corp, and Nokia Corp. (NOK), for the distribution of handheld devices.

We thus maintain our long-term Neutral recommendation on Brightpoint. Currently, it holds a short-term Zacks #4 Rank (Sell) on the stock.

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