SOURCE: Procera Networks

Procera Networks

February 21, 2012 16:05 ET

Procera Networks Announces 2011 Fourth Quarter and Full Year Results

FREMONT, CA--(Marketwire - Feb 21, 2012) - Procera Networks, Inc. (NASDAQ: PKT), the intelligent policy enforcement company, today reported financial results for its fourth quarter and year ended December 31, 2011.

Fourth Quarter 2011 Highlights

  • Record revenue of $15.6 million, up 108% from Q410
  • Bookings of approximately $10 million
  • Added 15 new service provider customers
  • Won two new Tier-1 customers in Asia Pacific and Western Europe
  • Received significant follow on orders during the fourth quarter, including multi-million dollar follow-on orders from a leading European fixed/mobile operator and a leading North American cable operator
  • Support revenue of $2.2 million, up 71% from Q410
  • Net income of $1.8 million, or $0.12 per diluted share, up from net income of $182,000, or $0.02 per diluted share, in Q410
  • Generated $2.2 million of cash from operations in Q411

Full Year 2011 Highlights

  • Record revenue of $44.4 million, up 118% from 2010
  • Added six new Tier-1 service provider customers
  • Support revenue of $7.0 million, up 55% year-over-year
  • Gross margin of 59.3% for 2011, up from 56.6% for 2010
  • Net income of $3.8 million, or $0.28 per diluted share, compared to a net loss of $2.9 million, or a loss of $0.27 per share, for 2010
  • Generated $4.6 million of cash from operations in 2011 and ended the year with $37.4 million of cash and short-term investments; no debt

Financial Guidance

Procera is providing annual revenue guidance for 2012 of 30% revenue growth, year-over-year.

Business Discussion

James Brear, president and CEO of Procera Networks, commented, "Our strong fourth quarter and full year financial results reflect performance against our growth initiatives for 2011, a year in which we achieved business expansion and balance: we entered new markets; expanded our product line; received significant follow-on orders, including eight from our existing Tier-1 customers; and won six new Tier-1 customers across fixed/mobile and cable broadband service providers. We continued to gain traction in the rapidly growing fixed/mobile market with strong contribution from fixed/mobile in 2011 and our momentum with cable customers continued with the significant follow-on orders we received from cable customers during 2011. We believe there are significant opportunities within broadband operators for expansion and replacements, as well as initial deployment of our solutions.

"We made important new product introductions during the fourth quarter, including our breakthrough PacketLogic Report Studio solution that provides customizable analytics to enable broadband service providers to effectively operate and monetize their networks. We provide unmatched access to deep network analytics that drives increased adoption of our solutions by service providers seeking to differentiate their offering and create new revenue generating services to offset the increasing cost of running networks.

"To better address the global demand we expect in 2012, this past year we doubled the size of our sales and field engineering teams to increase our sales and marketing reach. With 2012 underway, we are pleased with the achievements that we have made in building Procera into a leading competitor within the fast growing DPI market and believe 2012 will be a year that we establish ourselves as the leader in intelligent policy enforcement."

Fourth Quarter and 2011 Financial Results

Revenue for the fourth quarter of 2011 was $15.6 million, up 28% sequentially from revenue of $12.2 million in the third quarter of 2011 and up 108% from revenue of $7.5 million in the fourth quarter of 2010. Revenue for 2011 was $44.4 million, up 118% from revenue of $20.3 million in 2010.

Net income for the fourth quarter of 2011 was $1.8 million, or $0.12 per diluted share, compared to net income of $182,000, or $0.02 per diluted share, in the fourth quarter of 2010. Net income for 2011 was $3.8 million, or $0.28 per diluted share, compared to a net loss of $2.9 million, or $0.27 per share, in 2010.

Non-GAAP net income for the fourth quarter of 2011 was $2.3 million, or $0.15 per diluted share, compared to non-GAAP net income of $600,000, or $0.05 per diluted share, in the fourth quarter of 2010. Non-GAAP net income for 2011 was $5.5 million, or $0.41 per diluted share, compared to a non-GAAP net loss of $1.5 million, or $0.14 per share, in 2010. For an explanation of non-GAAP financial measures used in this release, and reconciliation to comparable GAAP measures, please refer to the Use of Non-GAAP Financial Information below.

Conference Call Information

Procera Networks, Inc. will host a conference call at 4:30 p.m. Eastern Time today, February 21, 2012, to discuss its financial results for the 2011 fourth quarter and full year ended December 31, 2011. Interested parties can access the live call by dialing 877-941-4774 or 480-629-9760 (International) and request the "Procera" call. A replay of the call will be available approximately one hour following the end of the call through 11:59 p.m. ET on Tuesday, February 28, 2012, by dialing 800-406-7325 and entering the replay code of 4512668#. To access the replay from international locations, dial 303-590-3030 using the same passcode. An archive of the conference call will be available on the Quarterly Results and Events section of the Procera Networks' Investor Relations Web site at www.proceranetworks.com/investors.

Safe Harbor Statement

This press release contains forward-looking statements, including statements relating to expectations for revenue growth in 2012, our ability to win new business, fixed/mobile sale opportunities, obtaining follow-on orders from new and existing customers, the importance of new product offerings and the expected demand for Procera Networks' products and services. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements, including risks related to the acceptance and adoption of our products; our ability to service and upgrade our products; lengthy sales cycles and lab and field trial delays by service providers; our dependence on a limited product line; our dependence on key employees; our ability to compete in our industry with companies that are significantly larger and have greater resources; our ability to protect our intellectual property rights in a global market; our ability to manufacture product quickly enough to meet potential demand; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact Procera Networks' business are set forth in our Form 10-Q filed for the quarter ended September 30, 2011 and our Form 10-K filed for the year ended December 31, 2010. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

Use of Non-GAAP Financial Information

Procera's management believes that certain non-GAAP financial measures, when taken together with the corresponding consolidated GAAP measures and related segment information, provide incremental insight into the underlying factors and trends affecting both Procera's performance and its cash generating potential. Management believes these non-GAAP measures increase the transparency of the company's current results and enable investors to more fully understand trends in its current and future performance.

Thus, in addition to the financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures that we believe are helpful in understanding our financial performance. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, "GAAP to Non-GAAP Reconciliations." Management regularly uses these supplemental non-GAAP financial measures internally to understand and manage our business and forecast future periods. Our non-GAAP financial measures include adjustments for stock-based compensation expenses: we have excluded the effect of stock-based compensation from our non-GAAP gross profit, operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees and consultants, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.

The non-GAAP financial measures are not consistent with GAAP because they do not fully reflect non-cash expenses. The above-mentioned non-GAAP measures are generated by adjusting the related GAAP measures solely to reverse the effect of the above mentioned non-cash expenses. The Company uses these financial measures to provide additional insight into current operating and business trends not readily apparent from the GAAP results.

Management believes users of Procera's financial statements will benefit from greater transparency in referring to these non-GAAP financial measures when assessing the Company's operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:

  • these non-GAAP financial measures are limited in their usefulness and should be considered only as a supplement to the Company's GAAP financial measures;
  • these non-GAAP financial measures should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP;
  • these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, the Company's GAAP financial measures;
  • these non-GAAP financial measures should not be considered to be superior to the Company's GAAP financial measures;
  • these non-GAAP financial measures were not prepared in accordance with GAAP and investors should not assume that the non-GAAP financial measures presented in this earnings release were prepared under a comprehensive set of rules or principles; and
  • management intends to continue to track and present these non-GAAP financial measures for future periods.

Further, these non-GAAP financial measures may be unique to Procera, as they may be different from non-GAAP financial measures used by other companies. As such, this presentation of non-GAAP financial measures may not enhance the comparability of the Company's results to the results of other companies.

A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure or measures appears at the end of this press release.

About Procera Networks Inc.

Procera Networks Inc. delivers Intelligent Policy Enforcement (IPE) solutions, leveraging advanced Deep Packet Inspection (DPI) technology. This enables carriers, services providers and higher education institutions to improve the quality and lifetime of their networks, better monetize their infrastructure investments, control hazards, and create attractive services for their users by making qualified business decisions based on granular user and traffic intelligence. Procera's core product suite, the PacketLogic line of platforms, is an engine that drives the PCC (Policy and Charging Control) ecosystem, by enforcing advanced network and service policies. PacketLogic is deployed at more than 600 customers who value the unparalleled accuracy and high-end performance of the PacketLogic solution. Founded in 2002, Procera (NASDAQ: PKT) is based in Silicon Valley and has offices around the globe. More information is available at www.proceranetworks.com.

Procera Networks, Inc.
Condensed Consolidated Statements of Operations
Unaudited

                         Three Months Ended         Twelve Months Ended
                            December 31,               December 31,
                     --------------------------  -------------------------
                         2011          2010          2011         2010
                     ------------  ------------  -----------  ------------
Sales:
   Product sales     $ 13,443,010  $  6,236,571  $37,449,630  $ 15,824,947
   Support sales        2,188,501     1,281,517    6,953,952     4,498,285
                     ------------  ------------  -----------  ------------
      Total sales      15,631,511     7,518,088   44,403,582    20,323,232
Cost of sales:
   Product cost of
    sales               6,738,246     3,046,366   17,358,230     8,312,770
   Support cost of
    sales                 206,157       107,465      722,649       500,275
                     ------------  ------------  -----------  ------------
      Total cost of
       sales            6,944,403     3,153,831   18,080,879     8,813,045
                     ------------  ------------  -----------  ------------

      Gross profit      8,687,108     4,364,257   26,322,703    11,510,187
                     ------------  ------------  -----------  ------------
                             55.6%         58.1%        59.3%         56.6%
Operating expenses:
   Research and
    development         1,343,027     1,033,542    4,646,573     3,304,650
   Sales and
    marketing           3,842,641     2,023,318   12,026,426     6,855,203
   General and
    administrative      1,724,265     1,086,805    5,706,697     4,086,908
                     ------------  ------------  -----------  ------------
      Total operating
       expenses         6,909,933     4,143,665   22,379,696    14,246,761
                     ------------  ------------  -----------  ------------

Income (loss) from
 operations             1,777,175       220,592    3,943,007    (2,736,574)
                     ------------  ------------  -----------  ------------

Interest and other
 income (expense),
 net                      (52,459)      (31,516)    (143,100)     (147,405)
                     ------------  ------------  -----------  ------------

   Income (loss)
    before income
    taxes               1,724,716       189,076    3,799,907    (2,883,979)
Income tax provision
 (benefit)                (34,708)        6,750       44,708         9,729
                     ------------  ------------  -----------  ------------
   Net income (loss) $  1,759,424  $    182,326  $ 3,755,199  $ (2,893,708)
                     ============  ============  ===========  ============

Net income (loss)
 per share - basic   $       0.12  $       0.02  $      0.29  $      (0.27)
                     ============  ============  ===========  ============
Net income (loss)
 per share - diluted $       0.12  $       0.02  $      0.28  $      (0.27)
                     ============  ============  ===========  ============

Shares used in
 computing net
 income (loss) per
 share*:
   Basic               14,402,510    11,210,956   12,931,562    10,898,228
   Diluted             14,810,053    11,270,054   13,218,604    10,898,228

* Shares used in per share calculations reflect a 1-for-10 reverse stock
  split effected by the Company on February 4, 2011.


Procera Networks, Inc.
Condensed Consolidated Balance Sheets

                     December 31,  December 31,
                         2011          2010
                     ------------  ------------
ASSETS
Current Assets:
   Cash and cash
    equivalents      $ 23,899,610  $  7,875,798
   Short-term
    investments        13,503,844             -
   Accounts
    receivable, net
    of allowance       11,403,226    11,407,220
   Inventories, net     7,625,103     2,549,695
   Prepaid expenses
    and other             937,579       831,737
                     ------------  ------------
Total current assets   57,369,362    22,664,450

Property and
 equipment, net         1,806,440       873,173
Goodwill                  960,209       960,209
Other non-current
 assets                    19,673        19,150
                     ------------  ------------
Total assets         $ 60,155,684  $ 24,516,982
                     ============  ============

LIABILITIES AND
 STOCKHOLDERS' EQUITY
Current liabilities:
   Line of credit    $          -  $  1,718,732
   Accounts payable     3,366,207     1,943,799
   Deferred revenue     5,504,538     3,732,756
   Accrued
    liabilities         3,844,894     2,662,564
                     ------------  ------------
Total current
 liabilities           12,715,639    10,057,851

Non-current
 liabilities:
   Deferred revenue       873,039       704,735
                     ------------  ------------
Total liabilities      13,588,678    10,762,586

Commitments and
 contingencies                  -             -

Stockholders'
 equity:
   Common stock            14,627        11,315
   Additional
    paid-in capital   105,205,360    76,093,272
   Accumulated other
    comprehensive
    loss                 (389,872)     (331,883)
   Accumulated
    deficit           (58,263,109)  (62,018,308)
                     ------------  ------------
Total stockholders'
 equity                46,567,006    13,754,396
                     ------------  ------------

Total liabilities
 and stockholders'
 equity              $ 60,155,684  $ 24,516,982
                     ============  ============




Procera Networks, Inc.
GAAP to Non-GAAP Reconciliation; and Supplemental Financial Information
Unaudited

                    Three Months Ended              Twelve Months Ended
           ------------------------------------  -------------------------
          December 31, September 30, December 31, December 31, December 31,
               2011         2011        2010         2011         2010
           -----------  -----------  ----------  -----------  ------------

Sales - U.S.
 GAAP as
 reported  $15,631,511  $12,193,203  $7,518,088  $44,403,582  $ 20,323,232

Reconciliation
 of Gross
 Profit:
 U.S. GAAP
  as
  reported $ 8,687,108  $ 7,464,453  $4,364,257  $26,322,703  $ 11,510,187
 As a
  percentage
  of sales        55.6%        61.2%       58.1%        59.3%         56.6%
 Adjustment:
  Stock-based
   compensation
   (1)          28,167       25,847      24,671      105,225        88,469
           -----------  -----------  ----------  -----------  ------------
 As
  Adjusted $ 8,715,275  $ 7,490,300  $4,388,928  $26,427,928  $ 11,598,656
 As a
  percentage
  of sales        55.8%        61.4%       58.4%        59.5%         57.1%

Reconciliation
 of Operating
 Expense:
 U.S. GAAP
  as
  reported $ 6,909,933  $ 5,393,557  $4,143,665  $22,379,696  $ 14,246,761
 Adjustment:
  Stock-based
   compensation
   (1)         482,071      409,440     393,001    1,619,654     1,325,713
           -----------  -----------  ----------  -----------  ------------
 As
  Adjusted $ 6,427,862  $ 4,984,117  $3,750,664  $20,760,042  $ 12,921,048

Reconciliation
 of Net Income
 (Loss):
 U.S. GAAP
  as
  reported $ 1,759,424  $ 2,044,873  $  182,326  $ 3,755,199  $ (2,893,708)
 Adjustment:
  Stock-based
   compensation
   (1)         510,238      435,287     417,672    1,724,879     1,414,182
           -----------  -----------  ----------  -----------  ------------
 As
  Adjusted $ 2,269,662  $ 2,480,160  $  599,998  $ 5,480,078  $ (1,479,526)

Reconciliation
 of Diluted Net
 Income (Loss)
 Per Share:
 U.S. GAAP
  as
  reported $      0.12  $      0.14  $     0.02  $      0.28  $      (0.27)
           ===========  ===========  ==========  ===========  ============
 Adjustment:
  Stock-based
   compensation
   (1)            0.03         0.03        0.04         0.13          0.13
           -----------  -----------  ----------  -----------  ------------
 As
  Adjusted $      0.15  $      0.17  $     0.05  $      0.41  $      (0.14)
           ===========  ===========  ==========  ===========  ============

 Shares used
  in computing
  diluted net
  income
  (loss) per
  share     14,810,053   14,592,691  11,270,054   13,218,604    10,898,228

(1) Stock-based compensation expense is calculated in accordance with the
    fair value recognition provisions of Statements of Financial Accounting
    Standards No. 123 (R).

Contact Information

  • Investor Relations Contact
    Charles Messman or Todd Kehrli
    MKR Group Inc.
    323-468-2300
    pkt@mkr-group.com

    Press Contact
    Jeannette Bitz
    Engage PR
    510-748-8200 x207
    JBitz@engagepr.com