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NEI Announces Financial Results for the Third Fiscal Quarter 2010
Revenue Increases 85% Compared to Q3 Fiscal 2009 Third Consecutive Quarter of GAAP Profitability
CANTON, Mass., July 29, 2010 /PRNewswire via COMTEX News Network/ -- NEI (Nasdaq: NENG), a leading provider of server-based application platforms, appliances, and lifecycle support services for software developers and OEMs worldwide, today reported financial results for its third fiscal quarter, the period ended June 30, 2010.
Third Quarter Financial Performance
Greg Shortell, President and Chief Executive Officer of NEI, commented, "The third quarter revenue was a record for NEI, as we delivered an 85% year-over-year increase supported by contribution from design wins secured in the last year. However, customer product transitions, project delays and visibility related to certain customer programs resulted in lower revenues than the guidance we had issued last quarter. Even so, we are pleased with the double-digit year-over-year growth in this record quarter."
Mr. Shortell continued, "In addition, our gross margin, operating expenses, and net income were all in-line with expectations and we are pleased to be reporting our third consecutive profitable quarter. We continue to deliver solid fundamental execution and remain focused on growing revenue and controlling expenses. The large 2009 design win from our largest customer has been fully integrated, and we are working on prototypes for an additional project with them, as discussed last quarter. We expect this business to be incremental to our revenue, beginning in the next calendar year."
During the first nine months of fiscal 2010, NEI added 18 new design wins, compared to 28 design wins last year. As a reminder, the Company now tracks design wins as only those with new customers, or with entirely disparate divisions within existing customers. EMC comprised 58 percent of total revenues during the quarter compared to 35 percent in the year ago quarter and Tektronix comprised 20 percent of net revenues during the quarter compared to 11 percent in the year-ago quarter.
Balance Sheet
NEI finished the quarter with $12.7 million in cash and cash equivalents and $48.7 million in working capital. Inventory and accounts receivable levels increased to $24.0 million and $35.7 million compared to $13.1 million and $27.5 million as of September 30, 2009, as the Company integrated the large 2009 design win from its largest customer. NEI also has a $10 million bank credit facility that it has yet to borrow from.
Business Outlook
NEI currently anticipates the following results for its fiscal fourth quarter ending September 30, 2010, based on current forecasts from certain customers and historical trends.
"Our revenue visibility is based on forecasts from our customers and our lower guidance is primarily related to the project-oriented nature of our customers who service the telecommunications market segment and, to a lesser extent, what appears to be some summer seasonality," stated Doug Bryant, Chief Financial Officer. "Even considering these factors, we are projecting a year-over-year revenue increase of at least 35 percent. Although we expect some choppiness in our revenues, we believe that we will continue to grow revenues and that we have the ability to leverage our existing infrastructure without significant incremental expenditures as annual revenues increase."
Conference Call Details
In conjunction with this announcement, NEI management will conduct a conference call at 10 a.m. (ET) to discuss the Company's operating performance. Management also anticipates providing the financial outlook for its quarter ending September 30, 2010. 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 1-877-870-5176 or 1-858-384-5517, and entering the passcode "354097" from three hours after the end of the call until 12 p.m. (ET) on August 5, 2010. The archived webcast 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, amortization expense and a one-time federal income tax benefit related to an NOL carryback. 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. 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.
About NEI
NEI is a leading provider of server-based application platforms, appliances and lifecycle 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), 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 and the most recent Form 10-Q for the quarter ended March 31, 2010 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:
NEI
781 332 1000
NEI
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
------------------
June 30, June 30,
2010 2009
---- ----
Net revenues $61,582 $33,329
Cost of revenues 54,833 28,292
------ ------
Gross profit 6,749 5,037
----- -----
Operating expenses:
Research and development 1,745 1,644
Selling and marketing 1,858 2,039
General and administrative 2,145 2,222
Amortization of intangible asset 389 439
--- ---
Total operating expenses 6,137 6,344
----- -----
Income (loss) from operations 612 (1,307)
Interest and other (expense) income,
net (36) 64
--- ---
Income (loss) before income taxes $576 $(1,243)
Provision for (benefit from) income
taxes (96) -
--- ---
Net income (loss) $672 $(1,243)
==== =======
Net income (loss) per share - basic $0.02 $(0.03)
===== ======
Net income (loss) per share - diluted $0.01 $(0.03)
===== ======
Shares used in computing basic net
income (loss) per share 42,555 42,764
Shares used in computing diluted net
income (loss) per share 45,369 42,764
The amounts in the table above include
employee stock-based compensation as
follows (in thousands):
Nine Months Ended
-----------------
June 30, June 30,
2010 2009
---- ----
Net revenues $160,664 $108,025
Cost of revenues 141,357 91,612
------- ------
Gross profit 19,307 16,413
------ ------
Operating expenses:
Research and development 5,012 4,739
Selling and marketing 5,676 6,240
General and administrative 6,365 6,572
Amortization of intangible asset 1,167 1,317
----- -----
Total operating expenses 18,220 18,868
------ ------
Income (loss) from operations 1,087 (2,455)
Interest and other (expense) income,
net (44) 76
--- ---
Income (loss) before income taxes $1,043 $(2,379)
Provision for (benefit from) income
taxes (63) -
--- ---
Net income (loss) $1,106 $(2,379)
====== =======
Net income (loss) per share - basic $0.03 $(0.06)
===== ======
Net income (loss) per share - diluted $0.03 $(0.06)
===== ======
Shares used in computing basic net
income (loss) per share 42,210 43,026
Shares used in computing diluted net
income (loss) per share 43,922 43,026
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,
2010 2009 2010 2009
---- ---- ---- ----
Cost of revenues $38 $34 $115 $109
Research and development 40 58 129 200
Selling and marketing 78 75 247 213
General and administrative 87 152 346 477
--- --- --- ---
$243 $319 $837 $999
==== ==== ==== ====
NEI
Non-GAAP Financial Measures and Reconciliations
(in thousands, except per share data)
(unaudited)
Three Months Ended
------------------
June 30, June 30,
2010 2009
---- ----
GAAP net income (loss) $672 $(1,243)
Amortization of intangible asset 389 439
Stock-based compensation 243 319
Benefit from income taxes (125) -
---- ---
Non-GAAP net income (loss) $1,179 $(485)
====== =====
GAAP basic net income (loss) per
share $0.02 $(0.03)
Amortization of intangible asset 0.01 0.01
Stock-based compensation 0.01 0.01
Benefit from income taxes (0.00) -
----- ---
Non-GAAP basic net income (loss)
per share $0.03 $(0.01)
===== ======
GAAP diluted net income (loss) per
share $0.01 $(0.03)
Amortization of intangible asset 0.01 0.01
Stock-based compensation 0.01 0.01
Benefit from income taxes (0.00) -
----- ---
Non-GAAP diluted net income (loss)
per share $0.03 $(0.01)
===== ======
Shares used in computing GAAP and
non-GAAP basic
net income (loss) per share 42,555 42,764
Shares used in computing GAAP and
non-GAAP diluted
net income (loss) per share 45,369 42,764
Nine Months Ended
-----------------
June 30, June 30,
2010 2009
---- ----
GAAP net income (loss) $1,106 $(2,379)
Amortization of intangible asset 1,167 1,317
Stock-based compensation 837 999
Benefit from income taxes (125) -
---- ---
Non-GAAP net income (loss) $2,985 $(63)
====== ====
GAAP basic net income (loss) per
share $0.03 $(0.06)
Amortization of intangible asset 0.03 0.03
Stock-based compensation 0.02 0.02
Benefit from income taxes (0.00) -
----- ---
Non-GAAP basic net income (loss)
per share $0.07 $(0.01)
===== ======
GAAP diluted net income (loss) per
share $0.03 $(0.06)
Amortization of intangible asset 0.03 0.03
Stock-based compensation 0.02 0.02
Benefit from income taxes (0.00) -
----- ---
Non-GAAP diluted net income (loss)
per share $0.07 $(0.01)
===== ======
Shares used in computing GAAP and
non-GAAP basic
net income (loss) per share 42,210 43,026
Shares used in computing GAAP and
non-GAAP diluted
net income (loss) per share 43,922 43,026
NEI
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September
June 30, 30,
2010 2009
---- ----
ASSETS
Current assets:
Cash and cash equivalents $12,715 $21,039
Accounts receivable, net 35,717 27,479
Taxes receivable 142 -
Refundable acquisition consideration - 3,629
Inventories 23,981 13,078
Prepaid expenses and other current
assets 1,706 1,521
----- -----
Total current assets 74,261 66,746
Property and equipment, net 1,601 1,622
Intangible asset 6,962 8,128
Other assets 245 174
--- ---
Total assets $83,069 $76,670
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $16,021 $14,200
Accrued liabilities 4,841 4,150
Deferred revenue 4,691 4,233
----- -----
Total current liabilities 25,553 22,583
Deferred revenue 3,103 2,517
----- -----
Total liabilities 28,656 25,100
------ ------
Stockholders' equity:
Common stock 479 471
Treasury stock (5,019) (4,842)
Additional paid-in capital 198,617 196,711
Accumulated deficit (139,664) (140,770)
-------- --------
Total stockholders' equity 54,413 51,570
------ ------
Total liabilities and stockholders'
equity $83,069 $76,670
======= =======
NEI
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
------------------
June 30, June 30,
2010 2009
---- ----
Cash flows from operating
activities:
Net income (loss) $672 $(1,243)
Adjustments to reconcile net income
(loss) to cash (used in) provided
by operating activities:
Depreciation and amortization 623 663
Stock-based compensation 243 319
Other adjustments (1) 133
Changes in operating assets and
liabilities (5,625) 2,334
------ -----
Net cash (used in) provided by
operating activities (4,088) 2,206
Net cash (used in) provided by
investing activities (277) (309)
Net cash provided by (used in)
financing activities 942 (512)
--- ----
Net (decrease) increase in cash and
cash equivalents (3,423) 1,385
Cash and cash equivalents, beginning
of period 16,138 18,335
------ ------
Cash and cash equivalents, end of
period $12,715 $19,720
======= =======
Nine Months Ended
-----------------
June 30, June 30,
2010 2009
---- ----
Cash flows from operating
activities:
Net income (loss) $1,106 $(2,379)
Adjustments to reconcile net income
(loss) to cash (used in) provided
by operating activities:
Depreciation and amortization 1,864 1,997
Stock-based compensation 837 999
Other adjustments (41) 165
Changes in operating assets and
liabilities (15,881) 10,443
------- ------
Net cash (used in) provided by
operating activities (12,115) 11,225
Net cash (used in) provided by
investing activities 2,944 (853)
Net cash provided by (used in)
financing activities 847 (655)
--- ----
Net (decrease) increase in cash and
cash equivalents (8,324) 9,717
Cash and cash equivalents, beginning
of period 21,039 10,003
------ ------
Cash and cash equivalents, end of
period $12,715 $19,720
======= =======
SOURCE NEI
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