SOURCE: Network Equipment Technologies

Network Equipment Technologies

November 01, 2011 16:26 ET

Network Equipment Technologies Announces Financial Results for Second Quarter of Fiscal 2012

FREMONT, CA--(Marketwire - Nov 1, 2011) - Telecommunications equipment maker Network Equipment Technologies, Inc. ("NET") (NASDAQ: NWK) today reported results for its fiscal second quarter ended September 30, 2011.

Total revenue in the second quarter of fiscal 2012 was $16.4 million, up from $11.3 million in the first quarter of fiscal 2012 and down from $20.2 million in the second quarter of fiscal 2011. The sequential increase in revenue was primarily due to the Federal government's fiscal year end and continued strength in product revenue from unified communications sales to enterprise customers and other IP-based applications.

Net loss in the second quarter was $7.5 million, or $0.25 per share, compared to a net loss of $8.4 million, or $0.28 per share, in the preceding quarter and a net loss of $3.4 million, or $0.11 per share, in the second quarter of the prior year.

Cash and investment balances were $45.4 million dollars at the end of the second quarter, down $8.7 million dollars from the end of first quarter. The reduction resulted primarily from cash used for operations.

On a non-GAAP basis, net loss was $6.7 million, or $0.22 per share, compared to a net loss of $7.5 million, or $0.25 per share, in the preceding quarter, and a net loss of $1.9 million, or $0.06 per share, in the second quarter of the prior year. Non-GAAP net loss adjusts for non-cash compensation, restructure charges, and other significant non-recurring items. Refer to the table below for reconciliation of GAAP to non-GAAP net loss.

"As expected, our Federal Government business saw an uptick in the quarter as a result of the government's fiscal year end; however, budget and spending deferrals continue to impact business," said President and CEO C. Nicholas Keating, Jr. "Our Enterprise business again saw revenue growth, both sequentially and year over year. Through our network of integrators and resellers, with significant direct touch by our sales and sales engineering professionals, our UC product portfolio continues to generate wins with key customers worldwide."

Conference Call Information:

NET will be hosting a conference call today to discuss these results at 5:00 p.m. ET. Please dial (800) 706-7745 or (617) 614-3472 and provide conference ID# 65316671. The 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 November 8, 2011; please dial (888) 286-8010 or (617) 801-6888 and enter conference ID# 24664876. A digital recording will be available on the company's website for one year.

About Network Equipment Technologies, Inc.
Network Equipment Technologies, Inc. (NET) delivers high performance networking equipment optimized for real-time communications. For more than a quarter of a century, NET has delivered solutions for multi-service networks requiring high degrees of versatility, security and performance. Today, the company is focused on providing secure real-time communications for unified communications (UC), SIP trunking, enterprise mobility, and IP-based multi-service networking. NET is headquartered in Fremont, CA and has 14 offices worldwide including the U.S., the U.K., France, the Middle East, China, Japan, Australia, and Latin America. The company sells its solutions to enterprise and government customers through a direct sales force and an international network of resellers and distributors. For more information on NET, please visit the company's website at 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 loss 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 loss, 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 stock-based compensation. 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, including statements about market opportunities and other 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, success in building new sales channels, achieving broad market acceptance for our products, the status of relations with and performance by third-party technology providers, challenges of managing inventory and production of products, certifications for new and existing products, compliance with export controls and other government regulations, federal government budget matters and procurement decisions, and circumstances regarding specific sales that can affect the recognition of 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 Six Months Ended
September
30, 2011
September
24, 2010
September
30, 2011
September
24, 2010
Revenue:
Product $ 12,951 $ 16,741 $ 20,650 $ 26,728
Service and other 3,477 3,489 7,091 6,983
Total revenue 16,428 20,230 27,741 33,711
Costs of revenue:
Cost of product revenue 8,259 7,305 13,612 12,927
Cost of service and other revenue 2,096 3,018 4,208 6,129
Total cost of revenue 10,355 10,323 17,820 19,056
Gross margin 6,073 9,907 9,921 14,655
Operating expenses:
Sales and marketing 5,208 5,023 9,672 9,756
Research and development 5,136 4,615 9,957 9,654
General and administrative 2,623 3,186 5,121 5,912
Total operating expenses 12,967 12,824 24,750 25,322
Loss from operations (6,894 ) (2,917 ) (14,829 ) (10,667 )
Other income (expense), net (38 ) 23 (4 ) (58 )
Interest expense, net (456 ) (346 ) (903 ) (674 )
Loss before taxes (7,388 ) (3,240 ) (15,736 ) (11,399 )
Income tax provision 147 154 219 205
Net loss $ (7,535 ) $ (3,394 ) $ (15,955 ) $ (11,604 )
Per share amounts
Basic and diluted net loss $ (0.25 ) $ (0.11 ) $ (0.53 ) $ (0.39 )
Basic and diluted common and common equivalent shares 30,397 29,737 30,358 29,731
NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September
30, 2011
(unaudited)
March
25, 2011
(1)
Current assets:
Cash and investments $ 43,455 $ 59,227
Restricted cash 1,942 2,192
Accounts receivable, net 11,007 8,701
Inventories 5,183 4,660
Prepaid expenses and other assets 6,212 5,860
Total current assets 67,799 80,640
Property and equipment, net 3,889 4,435
Other assets 3,592 4,296
Total assets $ 75,280 $ 89,371
Liabilities and Stockholders' Equity:
Accounts payable $ 7,262 $ 5,496
Other current liabilities 8,769 10,262
Total current liabilities 16,031 15,758
Long-term liabilities 1,596 1,234
3 3/4% convertible senior notes 10,500 10,500
7 1/4% redeemable convertible subordinated debentures 23,704 23,704
Stockholders' equity 23,449 38,175
Total liabilities and stockholders' equity $ 75,280 $ 89,371

(1) Derived from audited consolidated financial statements as of March 25, 2011.

NETWORK EQUIPMENT TECHNOLOGIES, INC.
GAAP TO NON-GAAP NET LOSS RECONCILIATION
(Unaudited - in thousands, except per share data)
Quarter Ended Six Months Ended
September 30, 2011 September 24, 2010 September 30, 2011 September 24, 2010
GAAP net loss $ (7,535 ) $ (3,394 ) $ (15,955 ) $ (11,604 )
Stock based compensation expense:
Cost of product revenue 83 113 160 217
Cost of service and other revenue 57 90 105 185
Sales and marketing 217 407 444 797
Research and development 299 495 616 1,003
General and administrative 201 361 415 710
Severance and restructure related:
General and administrative, accretion of discount on future cash flows from subleases 8 31 22 69
Non-GAAP net loss $ (6,670 ) $ (1,897 ) $ (14,193 ) $ (8,623 )
Non-GAAP net loss per share data:
Basic and diluted $ (0.22 ) $ (0.06 ) $ (0.47 ) $ (0.29 )
Common and common equivalent shares:
Basic and diluted 30,397 29,737 30,358 29,731

Contact Information