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Network Equipment Technologies Announces Financial Results for Fourth Quarter and Fiscal Year 2008
38% Annual Revenue Growth; Highest Profitability in 10 Years
Fremont, CA, April 30 2008 - Telecommunications equipment maker Network Equipment Technologies,
Inc. (NYSE: NWK) today reported its results for the fourth quarter of
fiscal 2008 and fiscal year 2008.
Total revenue in the fourth quarter was $33.4 million, a 15% increase
from $29.0 million in the third quarter and a 34% increase from $25.0
million in the fourth quarter of the prior fiscal year. NET has now
achieved eight consecutive quarters of revenue growth. Net income in
the fourth quarter was $2.8 million or $.09 per share, compared to
net income of $1.5 million or $.05 per share in the third quarter and
a net loss of $9.5 million or $0.37 per share in the fourth quarter
of the prior year. Fiscal 2008 results include the operating results
of Quintum Technologies following its acquisition by the Company on
December 4, 2007, and other accounting effects of the acquisition.
Total revenue in the fiscal year was $116.1 million, up from $84.1
million in fiscal 2007, an increase of 38%. Net income was $7.1
million or $0.25 per share, compared to a net loss of $16.2 million
or $0.65 per share in fiscal 2007.
Cash and investment balances at the end of fiscal 2008 were $165.7
million, compared to $161.2 million at the end of the third quarter
and $90.1 million at the end of the prior year. During the third
quarter, the company obtained net proceeds of $82 million from an $85
million senior convertible debt offering and used approximately $24
million of cash for the acquisition of Quintum.
Non-GAAP net income in the fourth quarter was $2.6 million or $0.09
per share, compared to $1.1 million or $0.04 per share in the fourth
quarter of the prior year. Non GAAP net income for the fiscal year
was $9.5 million or $0.33 per share, compared to a non-GAAP net loss
of $4.8 million or $0.19 per share for the prior year. Non-GAAP net
income was calculated by excluding non-cash stock-based compensation
expense, amortization of intangible assets from our acquisition of
Quintum, accretion and other restructure charges resulting from
vacating our former manufacturing facility, and a non cash charge for
the write-up in basis of Quintum finished goods inventory; offset by
additions for foreign exchange benefit from the dissolution of our
German subsidiary and the reversal of a reserve for deferred tax
assets for our United Kingdom subsidiary. Refer to table below for
reconciliation of GAAP to non-GAAP for net income and earnings per
share.
President and CEO C. Nicholas Keating, Jr. remarked, "We accomplished
a significant number of the objectives we established for fiscal year
2008. Revenue grew 38%, we reached our highest level of profitability
in 10 years, and our cash position increased by more than $75
million. We made a number of operational changes throughout the year
to streamline our business and lower our cost structure. We advanced
our products and customer reach through continued investment in
internal development and acquisition. Our products are today being
offered worldwide to government and enterprise customers in three
target markets: voice-over-IP, multi-service access, and high
performance computing. Our customer traction in each of these markets
is encouraging and we are seeing more pilots convert into programs.
The integration of Quintum Technologies, which we acquired in
December 2007, is progressing well and we are already seeing
strategic benefits of the combination."
"Looking ahead, fiscal year 2009 will be a year of execution for NET.
We will continue to invest in our growth through product development
and key partnerships, while also keeping our eye out for strategic
acquisition opportunities," added Keating.
Conference Call Information:
The Company will be hosting a conference call today to discuss these
results at 4:30 p.m. ET. Please dial (888) 680-0860 or (617) 213-4852
and provide conference ID# 51607089 to access the call. The conference
call will also be broadcast from http://ir.net.com.
A recording of the conference call will be provided by telephone and
the internet beginning two hours after completion of the call. The
replay may be accessed by telephone through midnight on May 7, 2008;
please dial (888) 286-8010 or (617) 801-6888 and enter conference ID#
93830277. A digital recording will be available on the company's
website for one year.
About Network Equipment Technologies, Inc.
For nearly a quarter of a century, Network Equipment Technologies,
Inc. has provided voice and data communications equipment for
multi-service networks requiring high degrees of versatility,
interoperability, security and performance. NET's broad family of
products are purpose-built for mixed-service, multi-protocol
networks; bandwidth-sensitive site communications; high performance,
security-sensitive transmissions; and converged communications. The
company's NX Series for network exchange solutions and VX Series for
voice exchange solutions enable interoperability and integration with
existing networks for seamless migration to secure IP-based voice and
data communications. In addition, Quintum, a subsidiary of NET,
delivers VoIP access solutions that bring the reliability and voice
clarity of public telephone networks to Internet telephony.
Visit www.net.com for more information.
Use of Non-GAAP Financial Information
To supplement the company's condensed consolidated financial
statements presented in accordance with GAAP, NET has provided certain
non-GAAP net income (loss) financial measures that adjusts for the
company's non-cash stock-based compensation expense, amortization of
intangible assets from our acquisition of Quintum, accretion and
other restructure charges resulting from vacating our former
manufacturing facility, a non cash charge for the write-up in basis
of Quintum finished goods inventory, additions for foreign exchange
benefit from the dissolution of our German subsidiary, and the
reversal of a reserve for deferred tax assets for our United Kingdom
subsidiary. These non-GAAP measures may include net income (loss) and
net income (loss) per share data that are adjusted from results based
on GAAP to exclude certain expenses, gains and losses. These non-GAAP
measures are provided to enhance investors' overall understanding of
the company's current financial performance and the company's
prospects for the future. NET believes the non-GAAP measures provide
useful information to both management and investors by excluding
certain expenses that may not be indicative of its core operating
results and reflect NET's ongoing business in a manner that allows
meaningful period-to-period comparisons. These measures should be
considered in addition to results prepared in accordance with GAAP,
but should not be considered a substitute for, or superior to, GAAP
results. The non-GAAP measures included in this press release have
been reconciled to the GAAP results in the attached tables.
Forward-Looking Statements
This press release contains forward-looking statements, within the
meaning of the safe harbor provisions of Section 21E of the Securities
Exchange Act of 1934, relating to revenue growth, profitability,
product development, and future sales. Investors are cautioned that
such statements are based on current expectations, forecasts and
assumptions that involve risks and uncertainty that may cause actual
results to differ materially from those expressed or implied in the
forward-looking statements. Factors that could affect such results
include our ability to develop and commercialize new products and
product enhancements, including relations with and performance by
third-party technology providers, new competition and technological
changes, the outcome of litigation regarding intellectual property,
the timing of orders and satisfaction of conditions to recognize
revenue, the challenges involved in integrating an acquired business
into the operations of NET, uncertainties relating to potential
acquisitions, and unanticipated or extraordinary expenses, as well as
the factors identified in Network Equipment Technologies' most recent
Annual Report on Form 10-K and most recent subsequent Quarterly
Report on Form 10-Q. Network Equipment Technologies disclaims any
intention or obligation to update or revise any forward looking
statements, whether as a result of new information, future events or
otherwise.
# # #
Company Contact:
Network Equipment Technologies, Inc.
Leigh Salvo
(510) 647-8870
lsalvo@directir.com
NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Quarter Ended Fiscal Year Ended
-------------------- --------------------
March 28, March 30, March 28, March 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue:
Product $ 30,184 $ 21,343 $ 102,608 $ 72,813
Service 3,248 3,688 13,536 11,281
--------- --------- --------- ---------
Total revenue 33,432 25,031 116,144 84,094
--------- --------- --------- ---------
Costs of revenue:
Cost of product revenue 13,940 8,131 45,001 28,821
Cost of service revenue 3,356 3,026 12,289 10,249
--------- --------- --------- ---------
Total cost of revenue 17,296 11,157 57,290 39,070
--------- --------- --------- ---------
Gross margin 16,136 13,874 58,854 45,024
Operating expenses:
Sales and marketing 5,899 4,971 20,178 18,699
Research and development 6,528 5,685 24,279 21,432
General and administrative 3,073 3,574 11,373 13,129
Restructure and other costs 96 10,187 175 10,183
--------- --------- --------- ---------
Total operating expenses 15,596 24,417 56,005 63,443
--------- --------- --------- ---------
Income (loss) from
operations 540 (10,543) 2,849 (18,419)
Other income (expense), net 157 19 404 (67)
Interest income, net 165 526 2,208 1,784
--------- --------- --------- ---------
Income (loss) before taxes 862 (9,998) 5,461 (16,702)
--------- --------- --------- ---------
Income tax benefit (1,890) (513) (1,684) (508)
--------- --------- --------- ---------
Net income (loss) $ 2,752 $ (9,485) $ 7,145 $ (16,194)
========= ========= ========= =========
Per share amounts
Net income (loss):
Basic $ 0.10 $ (0.37) $ 0.26 $ (0.65)
========= ========= ========= =========
Diluted $ 0.09 $ (0.37) $ 0.25 $ (0.65)
========= ========= ========= =========
Common and common equivalent shares:
Basic 28,936 25,354 27,423 25,003
========= ========= ========= =========
Diluted 35,756 25,354 28,415 25,003
========= ========= ========= =========
NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 28, March 30,
2008 2007
------------ ------------
Current assets:
Cash and investments $ 165,658 $ 90,132
Accounts receivable, net 23,174 14,822
Inventories 9,986 10,452
Prepaid expenses and other assets 8,031 3,242
------------ ------------
Total current assets 206,849 118,648
Property and equipment, net 9,459 10,581
Goodwill and purchased intangibles, net 41,317 --
Other assets 11,708 4,790
------------ ------------
Total assets $ 269,333 $ 134,019
============ ============
Liabilities and Stockholders' Equity
Accounts payable $ 9,968 $ 8,569
Other current liabilities 17,821 15,274
------------ ------------
Total current liabilities 27,789 23,843
Long-term liabilities 6,295 3,886
3 3/4% convertible senior notes 85,000 --
7 1/4% redeemable convertible subordinated
debentures 24,706 24,706
Stockholders' equity 125,543 81,584
------------ ------------
Total liabilities and stockholders' equity $ 269,333 $ 134,019
============ ============
NETWORK EQUIPMENT TECHNOLOGIES, INC.
GAAP TO NON-GAAP NET INCOME (LOSS) RECONCILIATION
(Unaudited - in thousands, except per share data)
Quarter Ended Fiscal Year Ended
-------------------- --------------------
March 28, March 30, March 28, March 30,
2008 2007 2008 2007
--------- --------- --------- ---------
GAAP net income (loss) $ 2,752 $ (9,485) $ 7,145 $ (16,194)
Stock based compensation expense:
Cost of product revenue 57 24 177 92
Cost of service revenue 68 17 165 44
Sales and marketing 250 82 721 257
Research and development 226 75 541 285
General and administrative 376 170 1,434 534
Acquisition related amortization:
Acquired intangibles -
Cost of product revenue 328 -- 473 --
Sales and marketing 502 -- 531 --
General and administrative 53 -- 70 --
Cost of product revenue,
amortization of purchase
adjustment to acquired
inventory 281 -- 281 --
Restructure related:
General and administrative,
accretion of discount on
future cash flows from
subleases 44 -- 270 --
Restructure and other -
Costs to vacate former
manufacturing facility 30 10,081 61 10,081
Other, primarily
severance 66 106 114 102
Other income (expense), net,
dissolution of subsidiary (385) -- (385) --
Income tax provision (benefit):
Income tax effect of above
items (39) 1 (95) --
Release of valuation
allowance (2,002) -- (2,002) --
--------- --------- --------- ---------
Non-GAAP net income (loss) $ 2,607 $ 1,071 $ 9,501 $ (4,799)
========= ========= ========= =========
Non-GAAP net income (loss)
per-share data:
Basic $ 0.09 $ 0.04 $ 0.35 $ (0.19)
========= ========= ========= =========
Diluted $ 0.09 $ 0.04 $ 0.33 $ (0.19)
========= ========= ========= =========
Common and common equivalent
shares:
Basic 28,936 25,354 27,423 25,003
========= ========= ========= =========
Diluted 35,756 25,354 28,415 25,003
========= ========= ========= =========
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