Network Equipment Technologies, Inc. ("NET") (NYSE: NWK) announced
today its results for the third quarter of fiscal 2009, ended
December 26, 2008.
Total revenue in the third quarter was $19.0 million, up 3% from
the prior quarter and down 35% from the third quarter of fiscal
2008. Government revenue was $15.3 million in the third quarter, an
increase of 14% sequentially and a decrease of 37% from the third
quarter of the prior fiscal year.
Net income in the third quarter, attributable to gains from the
early retirement of convertible bonds, was $13.1 million or $0.42
per share. In the prior quarter, the company reported a net loss of
$47.5 million or $1.66 per share, due primarily to impairment
charges. In the third quarter last fiscal year, net income was $1.5
million or $0.05 per share.
On a non-GAAP basis excluding items noted below, net loss in the
third quarter was $3.2 million or $0.11 per share, compared to net
loss of $8.1 million or $0.28 per share in the prior quarter, and
net income of $2.6 million, or $0.09 per share in the third quarter
of fiscal 2008. Non-GAAP net income and loss were calculated by
excluding the impairment of goodwill and other intangible assets,
non-cash stock-based compensation expense, amortization of
intangible assets from our acquisition of Quintum, accretion, and
other restructure charges resulting from severance and vacating our
former manufacturing facility; as well as excluding the gain on the
retirement of debt by the repurchase of convertible bonds. Refer to
the table below for reconciliation of GAAP to non-GAAP net income
and loss.
Cash and investment balances at the end of the quarter were
$101.6 million, down $30.0 million from the end of the prior
quarter. During the third quarter, the company used $23.1 million
for the buyback of convertible bonds and $311,000 for the
repurchase of shares of its common stock. Following the buybacks,
the company now has outstanding $13.0 million of its 3 3/4%
convertible senior notes and $23.7 million of its 7 1/4%
convertible subordinated debentures.
"We see our greatest near term opportunity emerging in VoIP
applications for unified communications in both the enterprise and
government markets. Our VoIP products are being used in an
increasing number of pilots globally. Working with our growing base
of channel partners, we are actively pursuing new opportunities and
converting successful pilots into larger deployments," said
president and CEO C. Nicholas Keating, Jr. "Although we are gaining
traction with our pilot programs, we believe that the uncertain
economy and continued delays in some government programs will
affect our customers' spending through at least the first half of
calendar 2009. As a result, we will continue to look for further
opportunities to improve efficiencies and trim expenses."
Conference Call Information:
The company will be hosting a conference call today to discuss
these results at 4:30 p.m. ET. Please dial (866) 700-0133 or (617)
213-8831 and provide conference ID# 38799965 to access the call.
The conference call will also be broadcast from the company's
website.
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
February 4, 2009; please dial (888) 286-8010 or (617) 801-6888 and
enter conference ID# 42424438. A digital recording will be
available on the company's website for one year.
About Network Equipment Technologies, Inc.
Network Equipment Technologies, Inc. (NET) provides network and
VoIP solutions to enterprises and government agencies that seek to
reduce the cost to deploy next generation unified and secure
communications applications. For a quarter of a century, NET has
delivered solutions for multi-service networks requiring high
degrees of versatility, security and performance. Today, the
company's broad family of products enables interoperability and
integration with existing networks for migration to secure IP-based
communications. Broadening NET's voice solutions, Quintum
Technologies, now a part of NET, is a VoIP innovator whose
applications bring the reliability and clarity of public telephone
networks to Internet telephony and unified communications. NET is
headquartered in Fremont, CA and has 14 offices worldwide including
the US, the UK, France, the Middle East, China, Japan, Australia,
and Latin America. The company sells its solutions through a direct
sales force and an international network of resellers and
distributors. For more information, visit www.net.com.
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 adjust
for the company's impairment charge for goodwill and other
intangible assets, non-cash stock-based compensation expense,
amortization of intangible assets from our acquisition of Quintum,
accretion and other restructure charges resulting from severance
and vacating our former manufacturing facility, and the gain on
extinguishment of debt. 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 possible future
operating results, including operating expenses and cash flows.
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 federal government
budget matters and procurement decisions, the timing of orders,
market acceptance for our new products, timely completion of
product development initiatives, relations with and performance by
third-party technology providers, new competition and technological
changes, success in building new sales channels, circumstances
regarding specific sales that can affect the recognition of
revenue, and the progression of patent litigation, as well as the
factors identified in Network Equipment Technologies' most recent
Annual Report on Form 10-K and subsequent reports filed with the
Securities and Exchange Commission. 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.
NOTE TO EDITORS: Financial tables follow
NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Quarter Ended Nine Months Ended
----------------------- -----------------------
December December December December
26, 2008 28, 2007 26, 2008 28, 2007
----------- ----------- ----------- -----------
Revenue:
Product $ 15,304 $ 25,480 $ 42,001 $ 72,424
Service 3,668 3,559 11,060 10,288
----------- ----------- ----------- -----------
Total revenue 18,972 29,039 53,061 82,712
----------- ----------- ----------- -----------
Costs of revenue:
Cost of product revenue
(1) 6,841 11,672 35,530 31,061
Cost of service revenue 3,529 3,052 11,006 8,933
----------- ----------- ----------- -----------
Total cost of revenue 10,370 14,724 46,536 39,994
----------- ----------- ----------- -----------
Gross margin 8,602 14,315 6,525 42,718
Operating expenses:
Sales and marketing 5,159 5,076 16,599 14,279
Research and
development 5,123 5,783 17,251 17,751
General and
administrative 2,872 2,774 9,885 8,300
Restructure and other
costs 1,420 27 1,814 79
Impairment of goodwill
and long-lived assets -- -- 34,197 --
----------- ----------- ----------- -----------
Total operating
expenses 14,574 13,660 79,746 40,409
----------- ----------- ----------- -----------
Income (loss) from
operations (5,972) 655 (73,221) 2,309
Other income, net 322 254 299 247
Interest (expense)
income, net 35 676 (212) 2,043
Gain on extinguishment of
debt 18,776 -- 28,927 --
----------- ----------- ----------- -----------
Income (loss)
before taxes 13,161 1,585 (44,207) 4,599
----------- ----------- ----------- -----------
Income tax provision 61 47 15 206
----------- ----------- ----------- -----------
Net income (loss) $ 13,100 $ 1,538 $ (44,222)$ 4,393
=========== =========== =========== ===========
Per share amounts
Net income (loss):
Basic $ 0.45 $ 0.06 $ (1.53)$ 0.16
=========== =========== =========== ===========
Diluted $ 0.42 $ 0.05 $ (1.53)$ 0.16
=========== =========== =========== ===========
Common and common
equivalent shares:
Basic 28,847 27,779 28,856 26,939
=========== =========== =========== ===========
Diluted 32,500 28,858 28,856 27,997
=========== =========== =========== ===========
(1) Includes charges for impairment of goodwill and long-lived assets of
$9.7 million for the nine months ended December 26, 2008.
NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 26, March 28,
2008 2008
(unaudited) (1)
--------------- ---------------
Current assets:
Cash and investments $ 100,440 $ 165,658
Restricted cash 1,150 --
Accounts receivable, net 12,009 23,174
Inventories 7,953 9,986
Prepaid expenses and other assets 11,138 8,031
--------------- ---------------
Total current assets 132,690 206,849
Property and equipment, net 7,254 9,459
Goodwill and purchased intangibles, net -- 41,317
Other assets 4,646 11,708
--------------- ---------------
Total assets $ 144,590 $ 269,333
=============== ===============
Liabilities and Stockholders? Equity
Accounts payable $ 6,118 $ 9,968
Other current liabilities 14,629 17,821
--------------- ---------------
Total current liabilities 20,747 27,789
Long-term liabilities 5,424 6,295
3 3/4% convertible senior notes 13,000 85,000
7 1/4% redeemable convertible
subordinated debentures 23,706 24,706
Stockholders? equity 81,713 125,543
--------------- ---------------
Total liabilities and
stockholders? equity $ 144,590 $ 269,333
=============== ===============
(1) Derived from audited consolidated financial statements as of March 28,
2008.
NETWORK EQUIPMENT TECHNOLOGIES, INC.
GAAP TO NON-GAAP NET INCOME (LOSS) RECONCILIATION
(Unaudited - in thousands, except per share data)
Quarter Ended Nine Months Ended
----------------------- -----------------------
December December December December
26, 2008 28, 2007 26, 2008 28, 2007
----------- ----------- ----------- -----------
GAAP net income (loss) $ 13,100 $ 1,538 $ (44,222)$ 4,393
Stock based
compensation expense:
Cost of product
revenue 71 51 221 120
Cost of service
revenue 85 37 229 97
Sales and marketing 312 189 950 471
Research and
development 277 136 824 315
General and
administrative 352 356 1,245 1,058
Acquisition related
amortization of
acquired intangibles
Cost of product
revenue -- 145 592 145
Sales and marketing -- 29 663 29
General and
administrative -- 17 88 17
Impairment of goodwill
and long-lived assets -- -- 43,938 --
Restructure related:
General and
administrative,
accretion of
discount on future
cash flows from
subleases -- 69 77 226
Restructure and
other:
Costs to vacate
former
manufacturing
facility 1,130 -- 1,130 31
Other, primarily
severance 290 27 673 48
Other income/(expense)
gain on extinguishment
of debt (18,776) -- (28,927) --
Income tax effect -- (11) -- (56)
----------- ----------- ----------- -----------
Non-GAAP net income
(loss) $ (3,159)$ 2,583 (22,519) 6,894
=========== =========== =========== ===========
Non-GAAP net income
(loss) per share data:
Basic $ (0.11)$ 0.09 $ (0.78)$ 0.26
=========== =========== =========== ===========
Diluted $ (0.11)$ 0.09 $ (0.78)$ 0.25
=========== =========== =========== ===========
Common and common
Equivalent shares:
Basic 28,847 27,779 28,856 26,939
=========== =========== =========== ===========
Diluted 28,847 28,858 28,856 27,997
=========== =========== =========== ===========
Company Contact: Network Equipment Technologies, Inc. Leigh
Salvo (510) 647-8870 Email Contact
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