NENG 2.07 Network Engines Announces Financial Results for the Third Quarter of Fiscal 2007 Business Wire "US Press Releases "
CANTON, Mass .--(BUSINESS WIRE)--
Network Engines, Inc. (NASDAQ: NENG), a leading provider of storage and security server appliance products and services, today reported financial results for its fiscal third quarter ended June 30, 2007 .
Third Quarter Financial Performance
-- Net revenues of $28.0 million in line with guidance of $27
million to $30 million , compared to $32.0 million in the
fiscal third quarter of 2006.
-- Gross profit of 19.0 percent of net revenues in line with
guidance of 18 to 19 percent compared to 16.8 percent in the
fiscal third quarter of 2006.
-- Operating expenses of $5.4 million , including $560,000 of
stock-based compensation expense, below guidance of $6.1 to
$6.4 million . Operating expenses compared to $6.9 million ,
which included $716,000 of stock-based compensation in fiscal
third quarter of 2006.
-- Net income on a GAAP basis was $416,000 , or $0.01 per share,
which included $604,000 of stock-based compensation charges,
better than the guided range of net loss of $(300,000) to net
income of $100,000 . The net income on a GAAP basis compared to
a net loss of $(1.1) million, or $(0.03) per share, in the
third fiscal quarter of 2006.
-- Non-GAAP net income, which excludes the stock-based
compensation expenses, was $1.0 million , or $0.02 per share,
exceeding guidance of between $350,000 and $750,000 . The
non-GAAP net income compared to a non-GAAP net loss of
$(334,000), or $(0.01) per share, in the fiscal third quarter
of 2006.
-- Cash, cash equivalents and short-term investments totaled
$40.1 million at the close of the quarter, compared to $38.7
million at the end of March 2007 and exceeded the guidance of
$36 million to $38 million .
EMC comprised 81% of total revenues during the fiscal third quarter, unchanged compared to the year-ago quarter, with revenues from other customers representing $5.3 million in the 2007 quarter compared to $6.2 million in the year-ago quarter. Revenues from Network Intelligence are now being included under EMC revenues since its acquisition by EMC in September 2006 . Excluding Network Intelligence revenues from the year-ago quarter, revenues from other customers grew 10% during the fiscal third quarter of 2007. This growth was driven by an increase of revenue from new customer design wins secured in the first half of fiscal 2007, which includes ongoing service of Microsoft Whale customers.
"I am pleased that Network Engines reported a profitable third quarter as the Company continued to make progress in the core elements of our long-term strategy," commented Greg Shortell, President and Chief Executive Officer of Network Engines. "While we are not satisfied that overall revenues were lower compared with the prior year, our efforts to diversify our customer base increased revenues from non-EMC customers by 10% when excluding Network Intelligence revenues from the year-ago quarter. Our progress this quarter in this respect was due primarily to the integration of new design wins that we secured earlier in the year. As importantly, we closely managed expenses while making the necessary investments in our business, which led to our second consecutive quarter of GAAP profitably and the generation of $1.4 million in cash."
Operational Highlights
Recent accomplishments include:
-- Introduced enhancements to our Network Engines Web-based
Services - NEWS - appliance management framework with the
release of NEWS 2.1 that improved the functionality,
manageability and deployment of Network Engines appliances
-- Announced the ACE Linux program, which allows Linux appliance
customers to deliver more secure appliances with lower
development costs and a faster time to market
-- Announced that NEWS is now available for ACE Linux customers
-- Initiated shipment of EMC's recently announced Generation 4 LP
Centera product
-- Launched two new products, the NS-IAG 1000 and NS-IAG 5000, to
support Microsoft Intelligent Application Gateway (IAG)
customers across a wider range of markets
"During the quarter, we continued to execute our growth strategy of diversifying our customer base through new account acquisition, integrating new technologies into our appliances, and making the necessary investments in our business," continued Shortell. "In line with our strategy, we are integrating new customer design wins secured earlier in the year, which began to contribute to revenues, and are on track with our customer acquisition objectives for the second half of the year. We also launched new technologies for our appliances including Linux and the latest versions of NEWS to provide value-add to existing clients while attracting a wider potential universe of customers. Most recently, we launched two new IAG platforms to support Microsoft IAG customers across a broader range of markets."
"Looking forward, we are confident that we have the right strategy in place, which will enable us to achieve long term growth, sustained profitability and ultimately increased shareholder value," concluded Shortell.
Business Outlook
Network Engines currently anticipates the following results for its fiscal 2007 fourth quarter ending September 30, 2007 , based on current forecasts from certain partners and historical and seasonal trends.
-- Net revenues in the range of $28 million to $31 million
-- Gross profit in the range of 18 percent to 19 percent of net
revenues
-- Operating expenses between $5.6 million and $5.9 million ,
including an estimated $560,000 of stock-based compensation
expense
-- Net income on a GAAP basis between $200,000 and $600,000
including an estimated $600,000 stock-based compensation
expense
-- Net income on a non-GAAP basis, which excludes the estimated
stock-based compensation, between $800,000 and $1.2 million
-- Cash, cash equivalents and short-term investments of between
$38 million and $40 million
"Our guidance for the September quarter reflects current forecasts from our OEM partners and the time required for new design wins to gain traction," stated Doug Bryant, Chief Financial Officer. "We will continue to manage our operating expenses while making the appropriate strategic investments in our business to support and grow future profitability."
Important Information About Non-GAAP References
References by Network Engines, Inc. (the "Company") to non-GAAP net income or loss and non-GAAP per share information refer to net income or loss or per share information excluding stock-based compensation expense and restructuring charges. GAAP requires that these expenses and charges be included in determining net income or loss and per share information. The Company's management uses non-GAAP operating expenses, and associated non-GAAP net income or loss (which is the basis for non-GAAP per share information) to make operational and investment decisions, and the Company believes that they are among several useful measures for an enhanced understanding of our operating results for a number of reasons.
First, although the Company undertakes analyses to ensure that its stock-based compensation grants are in line with peer companies and do not unduly dilute shareholders, the Company allocates grants and measures them at the corporate level. Second, management excludes their financial statement effect when planning or measuring the periodic financial performance of the Company's functional organizations since they are episodic in nature and unrelated to our core operating metrics. In addition, the Company's management excludes the financial statement effect of these items in evaluating and compensating employees due to the fact that it is difficult to forecast these expenses. Lastly, we believe that providing non-GAAP per share information affords investors a view of results that may be more easily compared to peer companies and enables investors to consider the Company's results on both a GAAP and non-GAAP basis in periods when the Company is undertaking non-recurring activities.
The Company believes these non-GAAP measures will aid investors' overall understanding of the Company's results by providing a higher degree of transparency for certain expenses, and providing a level of disclosure that will help investors understand how the Company plans and measures its own business. However, non-GAAP net income or loss should be construed neither as an alternative to GAAP net loss or net loss per share as an indicator of our operating performance nor as a substitute for cash flow from operations as a measure of liquidity because the items excluded from the non-GAAP measures often have a material impact on the Company's results of operations. Therefore, management uses, and investors should use, non-GAAP measures only in conjunction with our reported GAAP results.
Conference Call Details
In conjunction with this announcement, Network Engines management will conduct a conference call at 10:00 a.m. (ET) today to discuss the Company's operating performance and financial outlook. The conference call will be available live via the Internet by accessing Network Engines' web site at www.networkengines.com. Please go to the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software.
To listen to the conference call via phone, please dial (347) 284-6930 and reference "Network Engines." For those who cannot access the live broadcast, a replay will be available by dialing (719) 457-0820 or (888) 203-1112 and entering "3724984" from two hours after the end of the call until 11:59 p.m. (ET) on August 9, 2007 . The replay will also be available at the Network Engines web site.
About Network Engines
Network Engines appliances ease deployment and enhance the manageability and security of mission-critical software applications. Our heritage of providing product and service technologies tailored to support the entire lifecycle of our customers' appliances has made us the appliance partner of choice for software market leaders.
Founded in 1997, Network Engines is headquartered in Canton, Massachusetts , and trades on the NASDAQ exchange under the symbol NENG. For more information about the company's products and services, visit www.networkengines.com.
Safe Harbor for Forward-Looking Statements
Statements in this press release regarding the Company's future financial performance, including statements regarding future net revenues, gross profits, operating expenses including stock-based compensation expenses, net income (loss), non-GAAP net income (loss), and cash, cash equivalents and short-term investments position and any other statements about Network Engines' management's future expectations, beliefs, goals, plans or prospects, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company's actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including those factors contained in the Company's most recent Annual Report on Form 10-K for the year ended September 30, 2006 and the most recent Form 10-Q for the quarter ended March 31, 2007 under the section "Risk Factors" as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission . Forward-looking statements include statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. The Company assumes no obligations to update the information included in this press release.
Network Engines and the Network Engines logo are trademarks of Network Engines, Inc. All other trademarks are the property of their respective holders.
Network Engines, Inc
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
--------- -------- -------- --------
Net revenues $ 27,998 $32,048 $84,541 $87,353
Cost of revenues 22,683 26,664 67,902 72,977
--------- -------- -------- --------
Gross profit 5,315 5,384 16,639 14,376
--------- -------- -------- --------
Operating expenses:
Research and development 2,226 1,986 6,629 6,188
Selling and marketing 1,323 2,949 4,863 8,539
General and administrative 1,858 1,979 5,873 5,973
--------- -------- -------- --------
Total operating expenses 5,407 6,914 17,365 20,700
--------- -------- -------- --------
Income (loss) from operations (92) (1,530) (726) (6,324)
Interest and other income, net 524 425 1,433 1,135
--------- -------- -------- --------
Net income (loss) before income
taxes $ 432 $(1,105) $ 707 $(5,189)
Provision for income taxes 16 - 39 -
--------- -------- -------- --------
Net income (loss) $ 416 $(1,105) $ 668 $(5,189)
========= ======== ======== ========
Net income (loss) per share -
basic and diluted $ 0.01 $ (0.03) $ 0.02 $ (0.14)
========= ======== ======== ========
Shares used in computing basic
net income (loss) per share 40,871 38,218 40,517 38,023
Shares used in computing diluted
net income (loss) per share 41,270 38,218 41,208 38,023
The amounts in the table above include employee stock-based
compensation as follows (in thousands):
Three Months Ended Nine Months Ended
------------------ -----------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
--------- -------- -------- --------
Cost of revenues $ 44 $ 55 $ 124 $ 141
Research and development 297 297 877 835
Selling and marketing 76 205 243 614
General and administrative 187 214 620 553
--------- -------- -------- --------
$ 604 $ 771 $ 1,864 $ 2,143
========= ======== ======== ========
Network Engines, Inc.
Non-GAAP Financial Measures and Reconciliations
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
--------- -------- -------- --------
GAAP net income (loss) $ 416 $(1,105) $ 668 $(5,189)
Stock-based compensation 604 771 1,864 2,143
--------- -------- -------- --------
Non-GAAP net income (loss) $ 1,020 $ (334) $ 2,532 $(3,046)
========= ======== ======== ========
GAAP basic and diluted net income
(loss) per share $ 0.01 $ (0.03) $ 0.02 $ (0.14)
Stock-based compensation 0.01 0.02 0.04 0.06
--------- -------- -------- --------
Non-GAAP basic and diluted net
income (loss) per share $ 0.02 $ (0.01) $ 0.06 $ (0.08)
========= ======== ======== ========
Shares used in computing GAAP and
non-GAAP basic net income (loss)
per share 40,871 38,218 40,517 38,023
Shares used in computing GAAP and
non-GAAP diluted net income
(loss) per share 41,270 38,218 41,208 38,023
Network Engines, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, September 30,
2007 2006
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $ 14,696 $ 8,014
Short-term investments 25,402 24,804
Restricted cash 247 47
Accounts receivable, net 16,393 17,178
Inventories 12,160 8,445
Prepaid expenses and other current assets 986 1,460
------------ -------------
Total current assets 69,884 59,948
Property and equipment, net 1,129 1,093
Other assets 102 20
------------ -------------
Total assets $ 71,115 $ 61,061
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,782 $ 7,047
Accrued liabilities 4,895 3,942
Capital lease payable 20 19
Deferred revenue 3,204 1,049
------------ -------------
Total current liabilities 16,901 12,057
Capital lease payable 45 60
Deferred revenue 1,255 541
------------ -------------
Total liabilities 18,201 12,658
------------ -------------
Stockholders' equity:
Common stock 435 418
Treasury stock (2,838) (2,838)
Additional paid-in capital 186,246 182,420
Accumulated deficit (130,929) (131,597)
------------ -------------
Total stockholders' equity 52,914 48,403
------------ -------------
Total liabilities and stockholders'
equity $ 71,115 $ 61,061
============ =============
Source: Network Engines, Inc.
