CANTON, Mass., Aug. 2, 2012 /PRNewswire/ -- NEI (Nasdaq:
NEI), a leading provider of server-based application platforms,
deployment solutions and lifecycle support services for software
technology developers and OEMs worldwide, today reported financial
results for its fiscal third quarter, the period ended June 30, 2012.
Third Quarter Financial Performance and Highlights
- Net revenues were $64.6 million,
a decrease compared to the $66.1
million reported for the third fiscal quarter last year but
better than guidance of $51 to $56
million.
- EMC represented 54% of net revenues, a decrease from 63% of net
revenues for the third fiscal quarter last year and an increase
from the 42% of net revenues reported in the second quarter of
2012. Tektronix comprised 9% of net revenues during the quarter, an
increase from 8% of net revenues in the third fiscal quarter last
year and down from the 22% of net revenues for the second fiscal
quarter this year. Symantec represented 17% of net revenues during
the quarter, an increase from 10% of net revenues during the second
fiscal quarter. Since Symantec was a new customer in the year-ago
quarter, revenues were not yet significant.
- Gross margin was 11.2% of net revenues, within guidance of
11.0% to 11.5% and compared to 11.8% in the third quarter last
year.
- Operating expenses were $6.3
million, which was above the guidance range of $5.5 million to $6.0 million, and compared to
$6.1 million in the year-ago third
quarter. The higher operating expenses were due to $592,000 in expenses related to the Company's
pending acquisition by UNICOM Systems.
- Net income on a GAAP basis was $468,000, or $0.01
per share, which exceeded the guidance of a loss of $(200,000) to net income of $300,000, and compared to net income of
$1.9 million, or $0.04 per share in the same period a year
ago. The net income for the third quarter of fiscal 2012 is
inclusive of income tax expense of $361,000, while the year-ago quarter included
income tax (benefit) expense of $(85,000). As a result of the Company's
reversal of its deferred income tax valuation allowance at
September 30, 2011, NEI is now
required to record federal income tax expense, although it will be
realizing the benefit of its deferred income tax assets and
therefore substantially all of the federal income tax expense will
not require cash payments.
- Non-GAAP net income, which excludes stock-based compensation of
$118,000, amortization expense of
$280,000 and acquisition related
expenses of $592,000 associated with
the pending acquisition, was $1.5
million, or $0.03 per share,
better than the expected range of non-GAAP profit of $200,000 to $700,000. The non-GAAP net income
compared to non-GAAP net income of $2.4
million, or $0.06 per share,
in the third fiscal quarter of 2011.
On June 18, 2012, NEI signed a
definitive merger agreement with UNICOM Systems, Inc. ("UNICOM")
and a new UNICOM subsidiary under which UNICOM, a global
information technology company and part of the UNICOM group of
companies, will acquire NEI for $1.45
per common share in cash. As previously reported, the transaction
is valued at approximately $63.2
million and currently is expected to close by the end of
September 2012.
Greg Shortell, President and
Chief Executive Officer of NEI, commented, "During the quarter, NEI
signed a definitive agreement to be acquired by UNICOM Systems,
Inc., which we believe is in the best interests of our shareholders
and provides them with a significant premium to the stock's recent
price range prior to the announcement. Operationally, we delivered
another quarter of strong execution, exceeding our revenue guidance
and reporting ongoing profitability. Revenues were above
guidance primarily due to certain customers exceeding their
forecasts and also because this was the first quarter since the
flooding in Thailand that
shipments were not constricted by the availability of hard
drives."
For the nine month period ended June 30,
2012, net revenues were $200.2
million, compared to $202.8
million for the same period in 2011. Gross margin was
$23.8 million, or 11.9% of net
revenues, compared with gross margin of $22.9 million, or 11.3% of net revenues, for the
same period last year. Total operating expenses were $18.3 million, or 9.1 percent of net revenues,
compared with $18.2 million last
year, or 9.0 percent of net revenues in the same period last year.
On a GAAP basis, the Company reported net income of $3.2 million, or $0.07 per share, compared with net income of
$4.7 million, or $0.11 per share, in the same period last year.
The Company's non-GAAP net income, which excludes stock-based
compensation, amortization expenses and acquisition related
expenses, was $5.0 million compared
to non-GAAP net income of $6.4
million for the same period last year. Net income
amounts include $2.1 million of
income tax expenses compared to $149,000 for the same period last year for the
reason described above.
Balance Sheet
NEI finished the quarter with $14.3
million in cash and cash equivalents and $79.3 million in working capital. Accounts
receivable increased to $50.3 million
and inventory levels decreased to $36.6
million as of June 30, 2012
compared to $42.4 million and
$42.9 million, respectively, as of
March 31, 2012. NEI also has a
$10 million bank credit facility.
Business Outlook
NEI currently anticipates the following results for its fiscal
fourth quarter ending September 30,
2012, based on current forecasts from certain customers and
historical trends and excluding any costs related to the UNICOM
deal.
- Net revenues in the range of $56 million
to $61 million.
- Gross margin in the range of 10.0% to 11.0% of net
revenues.
- Operating expenses between $5.5 million
and $6.0 million, including an estimated $100,000 of stock-based compensation expense and
amortization expense of $280,000.
- Net income (loss) on a GAAP basis in the range of $(200,000) to $300,000, net of projected income
taxes at an effective rate of 40%.
- Net income on a non-GAAP basis in the range of $200,000 to $700,000, net of income taxes.
"We are projecting lower gross margins primarily due to customer
mix and lower projected net revenues," stated Doug Bryant, Chief Financial Officer. "In
regards to our balance sheet, we expect inventory levels to be
higher and our cash position to be lower at the end of September
because of the last time inventory purchases being executed during
the quarter related to the transition of certain EMC product lines
that we have previously announced."
Important Information about Non-GAAP References
References by NEI (the "Company") to non-GAAP net income and
non-GAAP per share information refer to net income or per share
information excluding stock-based compensation expense,
amortization expense and expenses related to the Company's pending
acquisition by UNICOM. GAAP requires that these expenses 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 (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 its
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 its core operating metrics. Last, 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 should be construed neither as an alternative to GAAP net
income or loss or per share information 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
the Company's reported GAAP results.
About NEI
NEI is a leading provider of server-based application platforms
and lifecycle support services for software developers and OEMs
worldwide. Through its expertise and comprehensive suite of
solution design, system integration, application management, global
logistics, support, and maintenance services, NEI is redefining
application deployment solutions to provide customers with a
sustainable competitive advantage. More than a decade of appliance
innovation with the ability to provide physical, virtual and
cloud-ready solutions makes NEI one of the most trusted software
deployment partners in the industry. Founded in 1997, NEI is
headquartered in Canton,
Massachusetts, with facilities in Plano, Texas and Galway, Ireland, and trades on the NASDAQ exchange
under the symbol NEI. For more information, visit www.nei.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 margin, operating expenses including stock-based
compensation expenses and amortization expense, net income,
profitability, inventory, cash, the proposed sale to Unicom and any
other statements about the Company's 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, 2011 and the most recent Form 10-Q for the quarter ended
March 31, 2012 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.
Contact:
Hayden IR
Peter Seltzberg
646-415-8972
peter@haydenir.com
ir@nei.com
NEI
|
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,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
$
64,589
|
|
$
66,105
|
|
$
200,178
|
|
$
202,764
|
Cost of
revenues
|
57,387
|
|
58,333
|
|
176,373
|
|
179,914
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
7,202
|
|
7,772
|
|
23,805
|
|
22,850
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Engineering and development
|
1,586
|
|
1,610
|
|
4,859
|
|
4,788
|
|
Selling
and marketing
|
1,685
|
|
1,874
|
|
5,090
|
|
5,735
|
|
General
and administrative
|
2,737
|
|
2,273
|
|
7,477
|
|
6,630
|
|
Amortization of intangible asset
|
280
|
|
332
|
|
840
|
|
997
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
6,288
|
|
6,089
|
|
18,266
|
|
18,150
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
914
|
|
1,683
|
|
5,539
|
|
4,700
|
Interest
and other (expense) income, net
|
(85)
|
|
117
|
|
(229)
|
|
163
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
$
829
|
|
$
1,800
|
|
$
5,310
|
|
$
4,863
|
Provision
for (benefit from) income taxes
|
361
|
|
(85)
|
|
2,124
|
|
149
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
468
|
|
$
1,885
|
|
$
3,186
|
|
$
4,714
|
|
|
|
|
|
|
|
|
|
|
Net income
per share - basic
|
$
0.01
|
|
$
0.04
|
|
$
0.08
|
|
$
0.11
|
Net income
per share - diluted
|
$
0.01
|
|
$
0.04
|
|
$
0.07
|
|
$
0.11
|
|
|
|
|
|
|
|
|
|
|
Shares
used in computing basic net income per share
|
42,517
|
|
42,951
|
|
42,448
|
|
42,901
|
Shares
used in computing diluted net income per share
|
43,026
|
|
43,910
|
|
43,030
|
|
44,072
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
$
19
|
|
$
31
|
|
$
65
|
|
$
102
|
|
|
Engineering and development
|
17
|
|
25
|
|
56
|
|
87
|
|
|
Selling
and marketing
|
19
|
|
76
|
|
53
|
|
229
|
|
|
General
and administrative
|
63
|
|
82
|
|
156
|
|
260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
118
|
|
$
214
|
|
$
330
|
|
$
678
|
NEI
|
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,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
GAAP net
income
|
$
468
|
|
$
1,885
|
|
$
3,186
|
|
$
4,714
|
|
Acquisition related expenses
|
592
|
|
-
|
|
691
|
|
-
|
|
Amortization of intangible asset
|
280
|
|
332
|
|
840
|
|
997
|
|
Stock-based compensation
|
118
|
|
214
|
|
330
|
|
678
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
net income
|
$
1,458
|
|
$
2,431
|
|
$
5,047
|
|
$
6,389
|
|
|
|
|
|
|
|
|
|
|
GAAP basic
net income per share
|
$
0.01
|
|
$
0.04
|
|
$
0.08
|
|
$
0.11
|
|
Acquisition related expenses
|
0.01
|
|
-
|
|
0.01
|
|
-
|
|
Amortization of intangible asset
|
0.01
|
|
0.01
|
|
0.02
|
|
0.02
|
|
Stock-based compensation
|
-
|
|
0.01
|
|
0.01
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
basic net income per share
|
$
0.03
|
|
$
0.06
|
|
$
0.12
|
|
$
0.15
|
|
|
|
|
|
|
|
|
|
|
GAAP
diluted net income per share
|
$
0.01
|
|
$
0.04
|
|
$
0.07
|
|
$
0.11
|
|
Acquisition related expenses
|
0.01
|
|
-
|
|
0.02
|
|
-
|
|
Amortization of intangible asset
|
0.01
|
|
0.01
|
|
0.02
|
|
0.02
|
|
Stock-based compensation
|
-
|
|
0.01
|
|
0.01
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
diluted net income per share
|
$
0.03
|
|
$
0.06
|
|
$
0.12
|
|
$
0.15
|
|
|
|
|
|
|
|
|
|
|
Shares
used in computing GAAP and non-GAAP basic net income
per share
|
|
|
|
|
|
|
|
42,517
|
|
42,951
|
|
42,448
|
|
42,901
|
|
|
|
|
|
|
|
|
|
|
Shares
used in computing GAAP and non-GAAP
diluted net income per share
|
|
|
|
|
|
|
|
43,026
|
|
43,910
|
|
43,030
|
|
44,072
|
NEI
|
Condensed Consolidated Balance
Sheets
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
September 30,
|
|
|
|
|
2012
|
|
2011
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
14,263
|
|
$
19,852
|
Accounts
receivable, net
|
|
50,274
|
|
43,522
|
Inventories
|
|
36,596
|
|
24,331
|
Deferred
income taxes
|
|
15,001
|
|
15,001
|
Prepaid
expenses and other current assets
|
3,747
|
|
4,886
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
119,881
|
|
107,592
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
2,569
|
|
2,569
|
Intangible
asset, net
|
|
4,404
|
|
5,244
|
Deferred
income taxes
|
|
14,147
|
|
15,855
|
Other
assets
|
|
129
|
|
131
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
141,130
|
|
$
131,391
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
24,447
|
|
$
23,360
|
Accrued
liabilities
|
|
5,089
|
|
5,749
|
Deferred
revenue
|
|
11,068
|
|
5,967
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
40,604
|
|
35,076
|
|
|
|
|
|
|
|
Deferred
revenue
|
|
4,765
|
|
4,095
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
45,369
|
|
39,171
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
Common stock
|
|
485
|
|
481
|
Treasury
stock
|
|
(5,823)
|
|
(5,646)
|
Additional paid-in
capital
|
|
200,454
|
|
199,926
|
Accumulated
deficit
|
|
(99,355)
|
|
(102,541)
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
95,761
|
|
92,220
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
$
141,130
|
|
$
131,391
|
NEI
|
Condensed Consolidated Statements of Cash
Flows
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
|
|
|
June
30,
|
|
June
30,
|
|
June
30,
|
|
June
30,
|
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
468
|
|
$
1,885
|
|
$
3,186
|
|
$
4,714
|
Adjustments to reconcile net income to cash (used in)
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
548
|
|
601
|
|
1,690
|
|
1,708
|
|
Stock-based compensation
|
|
118
|
|
214
|
|
330
|
|
678
|
|
Change in
deferred income taxes
|
|
190
|
|
-
|
|
1,708
|
|
-
|
|
Other
adjustments
|
|
63
|
|
32
|
|
71
|
|
72
|
|
Changes in
operating assets and liabilities
|
|
5,448
|
|
(2,255)
|
|
(11,717)
|
|
(5,562)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
(used in) provided by operating activities
|
|
6,835
|
|
477
|
|
(4,732)
|
|
1,610
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
used in investing activities
|
|
(429)
|
|
(588)
|
|
(772)
|
|
(1,998)
|
Net cash
provided by (used in) financing activities
|
|
35
|
|
7
|
|
(85)
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
6,441
|
|
(104)
|
|
(5,589)
|
|
(319)
|
Cash and
cash equivalents, beginning of period
|
|
7,822
|
|
15,108
|
|
19,852
|
|
15,323
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents, end of period
|
|
$
14,263
|
|
$
15,004
|
|
$
14,263
|
|
$
15,004
|
SOURCE NEI