SOURCE: Network Equipment Technologies

Network Equipment Technologies

May 05, 2010 16:03 ET

Network Equipment Technologies Announces Financial Results for Fourth Quarter of Fiscal 2010

Annual Revenue Increases 13% Over Prior Year

FREMONT, CA--(Marketwire - May 5, 2010) - Telecommunications equipment maker Network Equipment Technologies, Inc. ("NET") (NASDAQ: NWK) today reported its results for the fiscal fourth quarter and year ended March 26, 2010.

Total revenue in the fourth quarter was $18.9 million, up from $16.3 million in the prior quarter and up from $12.7 million in the fourth quarter of the prior fiscal year. The results for the quarter reflect increased revenues from the Federal government. Net loss was $3.1 million or $0.11 per share, compared to net loss of $6.8 million or $0.23 per share in the prior quarter and net loss of $9.3 million or $0.32 per share in fourth quarter of the prior year.

Total revenue in the fiscal year was $74.5 million, up 13% from $65.8 million in fiscal 2009. Net loss in the fiscal year was $17.8 million or $0.61 per share, compared to net loss of $53.5 million or $1.85 per share in fiscal 2009. Fiscal 2009 included charges for impairment of goodwill and other intangibles assets of $44.3 million that were partially offset by a gain of $28.9 million from the early retirement of convertible bonds at a discount.

On a non-GAAP basis, net loss in the fourth quarter was $1.8 million or $0.06 per share, compared to net loss of $4.5 million or $0.15 per share in the prior quarter, and net loss of $7.3 million, or $0.25 per share in the fourth quarter of fiscal 2009. Non-GAAP income adjusts for non-cash compensation, amortization of acquired intangibles, restructure charges, gains from the early extinguishment of debt, and other significant non-recurring items, including separation charges for former executives.

Cash and investment balances at the end of the fourth quarter were $81.0 million, down from $86.3 million at the end of the prior quarter. Cash and investments decreased by $17.2 million from the prior year, due in part to the retirement of $2.5 million of convertible debt, as well as cash used in operations.

"Throughout the past year, we selectively leveraged our existing resources, controlled our expenses, and introduced new products targeted at the emerging unified communications and secure voice markets. Today, we are seeing the benefits of those decisions as we gain traction in the global enterprise market," said President and CEO C. Nicholas Keating, Jr. "Increasingly, we are being brought into larger opportunities. Our prospects continue to grow with more and more Fortune 1000 global companies. This is due in large part to our strong direct-touch sales organization and through relationships with an expanding network of partners that are leading the advancement of unified communications, including Microsoft, HP, and other global integrators."

Conference Call Information:

NET will be hosting a conference call today to discuss these results at 5:00 p.m. ET. Please dial (866) 578-5771 or (617) 213-8055 and provide conference ID#43162198 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 May 12, 2010; please dial (888) 286-8010 or (617) 801-6888 and enter conference ID# 44940921. 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

Use of non-GAAP information. In evaluating NET's performance, management uses certain non-GAAP financial measures to supplement consolidated financial statements prepared under GAAP. Management believes that non-GAAP net income and other non-GAAP measures help indicate a base level of NET's performance before gains, losses, or charges that are considered by management to be outside of the recurring operations of our business. We believe that the non-GAAP information regarding recurring operations allows for a better understanding of NET's operating performance compared to prior periods and a clearer analysis of operating trends. Management uses this non-GAAP information for planning and forecasting of future periods, making decisions regarding spending levels and the allocation of resources, and determining management and employee compensation. We believe that disclosing these non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for financial measures prepared in accordance with GAAP, allows for greater transparency in the review of our ongoing financial and operational performance. Specifically, we believe these non-GAAP financial measures, when read in conjunction with NET's GAAP financials, provide useful information to investors by offering:

--  the ability to make more meaningful period-to-period comparisons of our
    ongoing operating results;
--  the ability to better identify trends in our underlying business and
    perform related trend analysis;
--  a better understanding of how management plans and measures our
    underlying business; and
--  an easier way to compare our most recent results of operations against
    investor and analyst financial models.

In determining non-GAAP net income, we exclude certain gains or losses that are the result of infrequent events. Such items include (i) gains from the early extinguishment of our debt, and (ii) gains or losses from significant restructuring or other infrequent charges such as termination and severance charges related to changes in senior management. Management believes that these exclusions are appropriate because these items are not indicative of ongoing operating results or limit comparability.

We also exclude certain non-cash charges that may vary between periods and between companies based on the valuation methodology chosen and the input of required data that may not be directly related to current business operations, such as a company's stock price. Such items include (i) stock-based compensation, and (ii) amortization and impairment of intangible assets. Management believes that excluding these items allows for more meaningful comparisons of our operating results across periods and to our competitors.

Limitations. These non-GAAP financial measures are not presented in accordance with, nor are they a substitute for, U.S. GAAP. The non-GAAP financial measures used should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes.

Forward Looking Statements

This press release contains forward-looking statements, relating to possible future operating results, within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. 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, the status of relations with and performance by third-party technology providers, our ability to develop and maintain sales relationships with other vendors and systems integrators, achieving broad market acceptance for our products, challenges of managing inventory and production of products, compliance with government regulations, federal government budget matters and procurement decisions, and the volume and timing of orders and revenue, 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
          (Unaudited - in thousands, except per share amounts)



                               Quarter Ended         Fiscal Year Ended
                           ----------------------- -----------------------
                            March 26,   March 27,   March 26,   March 27,
                              2010        2009        2010        2009
                           ----------- ----------- ----------- -----------
Revenue:
  Product                  $    15,307 $     9,201 $    58,142 $    51,202
  Service and other              3,593       3,526      16,352      14,586
                           ----------- ----------- ----------- -----------
     Total revenue              18,900      12,727      74,494      65,788
                           ----------- ----------- ----------- -----------
Costs of revenue:
  Cost of product revenue        6,467       4,983      27,934      30,772
  Cost of service and other
   revenue                       3,042       3,409      13,958      14,415
  Impairment of long-lived
   assets                           --         320          --      10,061
                           ----------- ----------- ----------- -----------
     Total cost of revenue       9,509       8,712      41,892      55,248
                           ----------- ----------- ----------- -----------
Gross margin                     9,391       4,015      32,602      10,540
Operating expenses:
  Sales and marketing            4,959       4,562      19,647      21,161
  Research and development       4,768       4,566      19,229      21,817
  General and
   administrative                2,656       3,235      11,824      13,120
  Restructure and other
   costs                            --         609          17       2,423
   Impairment of goodwill
    and long-lived assets           --          --          --      34,197
                           ----------- ----------- ----------- -----------
     Total operating
      expenses                  12,383      12,972      50,717      92,718
                           ----------- ----------- ----------- -----------
       Loss from operations     (2,992)     (8,957)    (18,115)    (82,178)
Other income (expense), net        132        (282)        546          17
Interest (expense) income,
 net                              (258)         10        (757)       (202)
Gain on extinguishment of
 debt                               --          --         555      28,927
                           ----------- ----------- ----------- -----------
       Loss before taxes        (3,118)     (9,229)    (17,771)    (53,436)
                           ----------- ----------- ----------- -----------
Income tax provision                29          52          72          67
                           ----------- ----------- ----------- -----------
       Net loss            $    (3,147)$    (9,281)$   (17,843)$   (53,503)
                           =========== =========== =========== ===========

Per share amounts

Net loss:

       Basic               $     (0.11)$     (0.32)$     (0.61)$     (1.85)
                           =========== =========== =========== ===========
       Diluted             $     (0.11)$     (0.32)$     (0.61)$     (1.85)
                           =========== =========== =========== ===========

Common and common
 equivalent shares:

       Basic                    29,395      28,847      29,178      28,854
                           =========== =========== =========== ===========
       Diluted                  29,395      28,847      29,178      28,854
                           =========== =========== =========== ===========




                  NETWORK EQUIPMENT TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                              (in thousands)


                                                March 26,       March 27,
                                                  2010            2009
                                              (unaudited)          (1)
                                            --------------- ---------------
Current assets:
    Cash and investments                    $        80,461 $        97,021
    Restricted cash                                     554           1,154
    Accounts receivable, net                         13,468           7,091
    Inventories                                       4,377           5,245
    Prepaid expenses and other assets                 7,961          10,073
                                            --------------- ---------------
      Total current assets                          106,821         120,584

    Property and equipment, net                       5,155           6,505
    Other assets                                      5,710           6,344
                                            --------------- ---------------
      Total assets                          $       117,686 $       133,433
                                            =============== ===============
Liabilities and Stockholders' Equity
    Accounts payable                        $         7,987 $         4,257
    Other current liabilities                        13,230          15,084
                                            --------------- ---------------
      Total current liabilities                      21,217          19,341

    Long-term liabilities                             2,161           4,568
    3 3/4% convertible senior notes                  10,500          13,000
    7 1/4% redeemable convertible
     subordinated debentures                         23,704          23,704
    Stockholders' equity                             60,104          72,820
                                            --------------- ---------------
         Total liabilities and
          stockholders' equity              $       117,686 $       133,433
                                            =============== ===============

(1) Derived from audited consolidated financial statements as of March 27,
2009.



                  NETWORK EQUIPMENT TECHNOLOGIES, INC.
              GAAP TO NON-GAAP NET LOSS RECONCILIATION
         (Unaudited - in thousands, except per share data)


                                Quarter Ended         Fiscal Year Ended
                            ----------------------  ----------------------
                             March 26,   March 27,   March 26,   March 27,
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------


GAAP net loss               $   (3,147) $   (9,281) $  (17,843) $  (53,503)
   Stock based compensation
    expense:
     Cost of product
      revenue                       98          31         366         252
     Cost of service and
      other revenue                 91          69         366         298
     Sales and marketing           372         303       1,680       1,253
     Research and
      development                  428         199       1,636       1,023
     General and
      administrative               335         357       1,741       1,602
   Acquisition-related
    amortization - acquired
    intangibles:
     Cost of product
      revenue                       --          --          --         592
     Sales and marketing            --          --          --         663
     General and
      administrative                --          --          --          88
   Impairment of goodwill
    and long-lived assets:
     Cost of product
      revenue                       --         320          --      10,061
     Operating expenses             --          --          --      34,197
   Restructure related:
     General and
      administrative,
      accretion of discount
      on future cash flows
      from subleases                41          62         196         139
     Sales and marketing,
      severance                     --          --         490          --
     General and
      administrative,
      severance                     --          --         516          --
     Restructure and other:
       Costs to vacate
        former
        manufacturing
        facility                    --          --          --       1,130
       Other, primarily
        severance                   --         609          17       1,282
   Other income/(expense)
    dissolution of
    subsidiary                      --          --          --          --
   Gain on early
    extinguishment of debt          --          (2)       (555)    (28,929)
                            ----------  ----------  ----------  ----------
Non-GAAP net loss           $   (1,782) $   (7,333) $  (11,390) $  (29,852)
                            ==========  ==========  ==========  ==========
Non-GAAP net loss per
 share data:
   Basic                    $    (0.06) $    (0.25) $    (0.39) $    (1.03)
                            ==========  ==========  ==========  ==========
   Diluted                  $    (0.06) $    (0.25) $    (0.39) $    (1.03)
                            ==========  ==========  ==========  ==========
Common and common
 equivalent shares:
   Basic                        29,395      28,847      29,178      28,854
                            ==========  ==========  ==========  ==========
   Diluted                      29,395      28,847      29,178      28,854
                            ==========  ==========  ==========  ==========

Contact Information

  • Company Contact:
    Network Equipment Technologies, Inc.
    Leigh Salvo
    (510) 647-8870
    Email Contact