CANTON, Mass., Jan. 28 /PRNewswire-FirstCall/ -- NEI (Nasdaq: NENG), a leading provider of server-based application platforms, appliances, and support services for software developers and OEMs worldwide, today reported financial results for its first fiscal quarter, the period ended December 31, 2009.
First Quarter Financial Performance
- Net revenues were $43.9 million, at the high end of the Company's guidance of $39 to $44 million and an increase of 8 percent compared sequentially to the $40.7 million in the fourth fiscal quarter of 2009 and 18 percent compared to the $37.2 million for the first quarter of the prior fiscal year. The increase both sequentially and year-over-year was due to increased volume from certain customers and the initial contribution from the two significant design wins from fiscal 2009.
- Gross profit was 13.7 percent of net revenues, within the guidance of 13.5 to 15.0 percent and compared sequentially to 15.0 percent in the fourth fiscal quarter of 2009 and compared to 15.1 percent for the first quarter of prior fiscal year.
- Operating expenses were $5.9 million, including $274,000 of stock-based compensation expense and $389,000 of amortization expense, better than guidance of between $6.2 million to $6.7 million. Operating expenses compared to $6.1 million in the year-ago first quarter, which included $304,000 of stock-based compensation expense and $439,000 of amortization expense.
- Net income on a GAAP basis was $139,000, or $0.00 per share, which included $312,000 of stock-based compensation expense and $389,000 of amortization expense. The results were better than guidance of a net loss of $(600,000) to breakeven. The net income on a GAAP basis compared to a net loss on a GAAP basis of $(466,000), or $(0.01) per share in the first fiscal quarter last year, which included $339,000 of stock-based compensation expense and $439,000 of amortization expense.
- Non-GAAP net income, which excludes stock-based compensation and amortization expenses, was $840,000, or $0.02 per share, better than the guidance of non-GAAP net income of $100,000 to $700,000. The non-GAAP net income compared to non-GAAP net income of $312,000, or $0.01 per share in the first fiscal quarter of 2009.
Greg Shortell, President and Chief Executive Officer of NEI, commented, "The first fiscal quarter was a positive quarter for us, and it sets the stage for a strong year. We met or exceeded guidance once again, and showed both sequential and year-over-year improvements in revenue and net income while maintaining a strong balance sheet. As expected, the significant design win with our largest customer announced in the fourth fiscal quarter last year began to contribute to our results in the December quarter, and we expect this to ramp to more than $10 million per quarter in incremental revenue in the coming quarters. We continue to pursue high-volume run-rate opportunities."
During this quarter NEI added eight new design wins, compared to 11 design wins in the first quarter of fiscal 2009. The Company now tracks design wins as only those with new customers, or with entirely disparate divisions within existing customers, representing a change from last year. Applying that same criteria to previous results, the Company had five first quarter design wins last year. Two of the eight design wins this quarter were run rate customers. EMC comprised 40 percent of total revenues during the quarter, compared to 33 percent in the year ago quarter and Tektronix comprised 21 percent of net revenues during the quarter compared to 14 percent in the year ago quarter.
Mr. Shortell continued, "As we have previously stated, we have been focused on winning large run-rate opportunities that would provide us with a clear path to sustained profitability. In 2009, we successfully closed new large run-rate design wins and now, in fiscal 2010, our focus is on ramping these design wins to revenue."
As part of the Company's stock repurchase program, the Company purchased approximately 158,000 shares for a total of $177,000 in the first fiscal quarter. Since June 2008, when the stock repurchase plan was initially implemented permitting the repurchase of up to $5 million of its common stock, the Company has cumulatively repurchased a total of 2.6 million shares for approximately $2.2 million through December 31, 2009.
NEI currently anticipates the following results for its fiscal second quarter ending March 31, 2010, based on current forecasts from certain customers and historical trends.
- Net revenues in the range of $49 million to $54 million.
- Gross profit in the range of 11 percent to 12.5 percent of net revenues.
- Operating expenses between $6.2 million and $6.7 million, including an estimated $203,000 of stock-based compensation expense and amortization expense of $389,000.
- Net income (loss) on a GAAP basis in the range of $(400,000) to $200,000.
- Net income on a non-GAAP basis in the range of $200,000 to $800,000.
"We expect a sequential and year-over-year increase in our revenues as we continue to ramp up the design wins booked during 2009," stated Doug Bryant, Chief Financial Officer. "The March quarter is a transition quarter for us as revenues continue to ramp, driven by the 2009 design win with our largest customer, but planned discounts on legacy products with that customer are fully implemented this quarter. Beyond the March quarter, as this significant design win becomes fully ramped and our other 2009 design wins begin to ramp, we expect to reach sustainable profitability as we carefully manage our expenses by leveraging our existing operating infrastructure."
Conference Call Details
In conjunction with this announcement, NEI management will conduct a conference call today at 10 a.m. (ET) to discuss the Company's operating performance and financial outlook. The conference call will be available live via the internet by accessing the NEI web site at www.nei.com, on the investor relations page. Please go to the web site at least 15 minutes prior to the call to register, download and install any necessary audio software.
To listen to the conference call via phone, please dial 1-877-407-9039 or 1-201-689-8470. For those who cannot access the live broadcast, a replay will be available by dialing 1-877-660-6853 or 1-201-612-7415, entering account number 3055 and entering the passcode "342948" from three hours after the end of the call until 12 p.m. (ET) on February 4, 2010. The replay will also be available at the NEI web site.
Important Information about Non-GAAP References
References by NEI (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 amortization expense. 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 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. 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 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.
NEI is a leading provider of server-based application platforms, appliances and support services for software developers and OEMs worldwide. Through its comprehensive suite of services that include solution design, integration control, support and other value-added service capabilities, NEI enables customers to more effectively deploy, manage, service and support their solutions. Founded in 1997, NEI is headquartered in Canton, Massachusetts and trades on the NASDAQ exchange under the symbol NENG. For more information about NEI's products and services, 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 profits, operating expenses including stock-based compensation expenses, amortization expense, net income (loss), additional run-rate business from existing customers, profitability 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, 2009 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.
NEI Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three Months Ended ------------------ December 31, December 31, 2009 2008 ---- ---- Net revenues $43,878 $37,235 Cost of revenues 37,882 31,627 ------ ------ Gross profit 5,996 5,608 ----- ----- Operating expenses: Research and development 1,683 1,442 Selling and marketing 1,758 2,177 General and administrative 2,021 2,075 Amortization of intangible asset 389 439 --- --- Total operating expenses 5,851 6,133 ----- ----- Income (loss) from operations 145 (525) Interest and other income, net 18 59 --- --- Income (loss) before income taxes $163 $(466) Provision for income taxes 24 - --- --- Net income (loss) $139 $(466) ==== ===== Net income (loss) per share - basic and diluted $0.00 $(0.01) ===== ====== Shares used in computing basic net income (loss) per share 42,027 43,137 Shares used in computing diluted net income (loss) per share 42,833 43,137 The amounts in the table above include employee stock-based compensation as follows (in thousands): Three Months Ended ------------------ December 31, December 31, 2009 2008 ---- ---- Cost of revenues $38 $35 Research and development 46 84 Selling and marketing 77 61 General and administrative 151 159 --- --- $312 $339 ==== ==== NEI Non-GAAP Financial Measures and Reconciliations (in thousands, except per share data) (unaudited) Three Months Ended ------------------- December 31, December 31, 2009 2008 ---- ---- GAAP net income (loss) $139 $(466) Amortization of intangible asset 389 439 Stock-based compensation 312 339 --- --- Non-GAAP net income $840 $312 ==== ==== GAAP basic and diluted net income (loss) per share $0.00 $(0.01) Amortization of intangible asset 0.01 0.01 Stock-based compensation 0.01 0.01 ---- ---- Non-GAAP basic and diluted net income per share $0.02 $0.01 ===== ===== Shares used in computing GAAP and non-GAAP basic net income (loss) per share 42,027 43,137 Shares used in computing GAAP diluted net income (loss) per share 42,833 43,137 Shares used in computing non-GAAP diluted net income per share 42,833 43,154 NEI Condensed Consolidated Balance Sheets (in thousands) (unaudited) December 31, September 30, 2009 2009 ---- ---- ASSETS Current assets: Cash and cash equivalents $21,101 $21,039 Accounts receivable, net 29,720 27,479 Refundable acquisition consideration - 3,629 Inventories 15,864 13,078 Prepaid expenses and other current assets 1,706 1,521 ----- ----- Total current assets 68,391 66,746 Property and equipment, net 1,508 1,622 Intangible asset 7,739 8,128 Other assets 171 174 --- --- Total assets $77,809 $76,670 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $15,491 $14,200 Accrued liabilities 3,219 4,150 Deferred revenue 4,298 4,233 ----- ----- Total current liabilities 23,008 22,583 Deferred revenue 2,952 2,517 ----- ----- Total liabilities 25,960 25,100 ------ ------ Stockholders' equity: Common stock 471 471 Treasury stock (5,019) (4,842) Additional paid-in capital 197,028 196,711 Accumulated deficit (140,631) (140,770) -------- -------- Total stockholders' equity 51,849 51,570 ------ ------ Total liabilities and stockholders' equity $77,809 $76,670 ======= ======= NEI Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended ------------------- December 31, December 31, 2009 2008 ---- ---- Cash flows from operating activities: Net income (loss) $139 $(466) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 617 672 Stock-based compensation 312 339 Other adjustments 2 25 Changes in operating assets and liabilities (4,338) 2,850 ------ ----- Net cash (used in) provided by operating activities (3,268) 3,420 Net cash provided by (used in) investing activities 3,506 (178) Net cash used in financing activities (176) (85) ---- --- Net increase in cash and cash equivalents 62 3,157 Cash and cash equivalents, beginning of period 21,039 10,003 ------ ------ Cash and cash equivalents, end of period $21,101 $13,160 ======= =======