SOURCE: Procera Networks

Procera Networks

November 04, 2013 16:03 ET

Procera Networks Announces Third Quarter 2013 Financial Results

FREMONT, CA--(Marketwired - Nov 4, 2013) - Procera Networks, Inc. (NASDAQ: PKT)

  • Reports record quarterly revenue of $21.3 million, up 33% year-over-year
  • Reports record bookings of $22.6 million, up 39% year-over-year

Procera Networks, Inc. (NASDAQ: PKT), the global intelligent policy enforcement company, today reported financial results for its third quarter ended September 30, 2013.

Revenue for the third quarter of 2013 was a record of $21.3 million, up 33% from revenue of $16.1 million in the third quarter of 2012.

GAAP net loss for the third quarter of 2013 was $3.0 million, or a loss of $0.15 per diluted share, compared to net income of $2.8 million, or $0.14 per diluted share, for the third quarter of 2012. Non-GAAP net loss for the third quarter of 2013 was $0.2 million, or a loss of $0.01 per diluted share, compared to non-GAAP net income of $3.6 million, or $0.18 per diluted share, for the third quarter of 2012. A description of the non-GAAP financial measures and reconciliation to comparable GAAP measures is provided in the accompanying table entitled "Use of Non-GAAP Financial Information" below.

"We are pleased to report another strong quarter, including record revenue and bookings. During the third quarter we expanded our existing customer base and attracted new top-tier customers. Our new customer wins and partnership momentum reflect our leadership position in the market and the strong demand for our technology," stated James Brear, President and CEO of Procera Networks. "We continue to feel very good about the health of our business and we will stay focused on executing on our long-term strategy."

Third Quarter 2013 Business and Financial Highlights

  • Record revenue and bookings in the third fiscal quarter; revenue was $21.3 million, up 33% year-over-year and bookings were $22.6 million, up 39% year-over-year.
  • Added 18 new service provider customers during the third quarter.
  • Selected by five new Tier 1 service providers.
  • Announced partnership with Skyfire, a wholly-owned subsidiary of Opera Software.
  • Launched PacketLogic™ 8960, the fastest IPE appliance in the industry.
  • Provided industry leadership by being the only vendor in our market to demonstrate Network Function Virtualization testing for the SDN World Congress in Germany.

Guidance

Procera is reiterating its guidance for annual revenue growth of at least 30% for 2013.

This guidance is an estimate only and actual performance could differ. The Company's financial results historically have been volatile, and a number of uncertainties and other factors may cause the Company's future results, performance or achievements to be materially different from prior results.

Conference Call Information

Procera Networks, Inc. is hosting a conference call for analysts and investors to discuss its third quarter 2013 results and outlook for its fourth quarter of 2013 at 1:30 p.m. Pacific time (4:30 p.m. Eastern time) today, November 4, 2013. A live audio webcast of the conference call along with supplemental financial information will also be accessible from the "Investors Relations" section of the Company's website at http://proceranetworks.com/investors. A replay will be available following the call on the Company's Investor Relations website or for one week at the following numbers: (800) 406-7325 (domestic), (303) 590-3030: (international) using ID# 4643384. An archived version of the audio from the call will be available for at least thirty days on the Company's website at http://proceranetworks.com/investors.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements related to Procera Networks, Inc., including statements about Procera's expectations for 2013 revenue growth and long-term growth, and the market opportunity, as well as the Company's general outlook. Statements in this release that are not historical or current facts are forward-looking statements. All forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, without limitation, risks and uncertainties related to the acceptance and adoption of Procera's products; the Company's ability to service and upgrade its products; lengthy sales cycles and lab and field trial delays by service providers; its ability to obtain any follow-on orders from major customers; its customers canceling orders; its dependence on a limited product line and key customers; its dependence on key employees; its ability to compete in our industry with companies that are significantly larger and have greater resources; its ability to protect its intellectual property rights in a global market; its ability to manufacture product quickly enough to meet potential demand; its ability to continue to integrate Vineyard Networks and realize anticipated benefits from the acquisition; and other risks and uncertainties described more fully in the Company's 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 described in the "Risk Factors" sections of its Form 10-K filed for the year ended December 31, 2012 and its Form 10-Q filed for the quarter ended June 30, 2013, and other reports filed with the SEC, which are available free of charge on the SEC's website at http://www.sec.gov or on Procera's website at http://www.proceranetworks.com. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements in this press release are based on information available to Procera as of the date hereof, and the Company undertakes no obligation to update, amend or clarify any forward-looking statement for any reason.

Use of Non-GAAP Financial Information

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. Our management regularly uses these supplemental non-GAAP financial measures internally to understand and manage our business and forecast future periods and believes that these non-GAAP financial measures, when taken together with the corresponding GAAP measures, provide incremental insight into the underlying factors and trends affecting both the Company's performance and its cash-generating potential.

Our non-GAAP financial measures include adjustments for stock-based compensation expenses; business development expenses; and acquisition-related intangible asset amortization, deferred compensation amortization and tax effects. We have excluded the effect of stock-based compensation; the cost of outside professional services for negotiating and performing legal, accounting and tax due diligence for potential mergers, and acquisitions; and acquisition-related intangible asset and deferred compensation amortization, and tax effects, from our non-GAAP gross profit, operating expenses and net income measures. Stock-based compensation, which represents the estimated fair value of stock options and restricted stock granted to employees, is excluded since grant activities vary significantly from quarter to quarter in both quantity and fair value. In addition, although stock-based compensation will recur in future periods, excluding this expense allows us to better compare core operating results with those of our competitors who also generally exclude stock-based compensation from their core operating results, and who may have different granting patterns and types of equity awards and who may use different option valuation assumptions than we do. Business development expenses are necessary as part of certain growth strategies, such as through mergers and acquisitions, and will occur when such transactions are pursued. We have excluded these expenses because they can vary materially from period-to-period and transaction-to-transaction and expenses associated with these business development activities are not considered a key measure of the Company's operating performance. Acquisition-related intangible asset amortization, deferred compensation amortization and tax effects represent non-cash charges and benefits that result from the accounting for acquisitions. We have excluded these items because, in any period, they may not directly correlate to the underlying performance of the Company's business and these items can vary materially from period-to-period and transaction-to-transaction. In addition, we exclude these acquisition-related costs and benefits when evaluating our current operating performance.

Our non-GAAP financial measures may not reflect the full economic impact of the Company's activities. Further, these non-GAAP financial measures may be unique to the Company, as they may be different from non-GAAP financial measures used by other companies, including the Company's competitors. 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. Therefore, these non-GAAP financial measures are limited in their usefulness and investors are cautioned not to place undue reliance on our non-GAAP financial measures. In addition, investors are cautioned that these non-GAAP financial measures are not intended to be considered in isolation and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP.

For a reconciliation 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."

About Procera Networks Inc.

Procera Networks Inc. (NASDAQ: PKT) delivers Internet Intelligence solutions to service providers and network equipment manufacturers for analytics and enforcement of broadband traffic worldwide. Procera's solutions provide actionable intelligence and policy enforcement to ensure a high quality of experience for any Internet and network connected device. For more information, visit www.proceranetworks.com or follow Procera on Twitter at @ProceraNetworks.

   
Procera Networks, Inc.  
Condensed Consolidated Statements of Operations  
Unaudited  
(in thousands, except per share data)  
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2013     2012     2013     2012  
Sales:                                
  Product sales   $ 16,301     $ 12,948     $ 40,328     $ 34,640  
  Support sales     5,032       3,113       13,015       8,418  
    Total sales     21,333       16,061       53,343       43,058  
Cost of sales:                                
  Product cost of sales     10,080       4,053       22,451       12,671  
  Support cost of sales     896       487       2,442       956  
    Total cost of sales     10,976       4,540       24,893       13,627  
                                 
    Gross profit     10,357       11,521       28,450       29,431  
      48.5 %     71.7 %     53.3 %     68.4 %
Operating expenses:                                
  Research and development     3,945       1,931       12,532       5,414  
  Sales and marketing     7,322       4,573       21,293       13,053  
  General and administrative     2,510       2,386       9,498       6,823  
    Total operating expenses     13,777       8,890       43,323       25,290  
                                 
Income (loss) from operations     (3,420 )     2,631       (14,873 )     4,141  
                                 
Interest and other income (expense), net     232       161       203       108  
                                 
  Income (loss) before income taxes     (3,188 )     2,792       (14,670 )     4,249  
Income tax provision (benefit)     (205 )     29       (1,688 )     141  
  Net income (loss)   $ (2,983 )   $ 2,763     $ (12,982 )   $ 4,108  
                                 
Net income (loss) per share - basic   $ (0.15 )   $ 0.14     $ (0.65 )   $ 0.24  
Net income (loss) per share - diluted   $ (0.15 )   $ 0.14     $ (0.65 )   $ 0.23  
                                 
Shares used in computing net income (loss) per share:                                
  Basic     20,031       19,305       20,007       17,304  
  Diluted     20,031       19,801       20,007       17,824  
                                 
             
Procera Networks, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands)  
   
    September 30,     December 31,  
    2013     2012  
ASSETS                
Current Assets:                
  Cash and cash equivalents   $ 77,138     $ 30,933  
  Short-term investments     31,723       100,762  
  Accounts receivable, net of allowance     20,295       16,603  
  Inventories, net     17,048       11,240  
  Prepaid expenses and other     3,278       2,012  
Total current assets     149,482       161,550  
                 
Property and equipment, net     6,197       4,474  
Intangible assets, net     6,881       -  
Goodwill     13,089       960  
Deferred tax asset     891       -  
Other non-current assets     95       54  
Total assets   $ 176,635     $ 167,038  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 4,858     $ 5,453  
  Deferred revenue     10,358       6,953  
  Accrued liabilities     5,706       4,949  
Total current liabilities     20,922       17,355  
                 
Non-current liabilities:                
  Deferred revenue     2,572       2,878  
  Deferred tax liability     1,771       -  
Total liabilities     25,265       20,233  
                 
Commitments and contingencies     -       -  
                 
Stockholders' equity:                
  Common stock     21       20  
  Additional paid-in capital     218,347       199,793  
  Accumulated other comprehensive loss     (1,084 )     (76 )
  Accumulated deficit     (65,914 )     (52,932 )
Total stockholders' equity     151,370       146,805  
                 
Total liabilities and stockholders' equity   $ 176,635     $ 167,038  
                 
                               
Procera Networks, Inc.  
GAAP to Non-GAAP Reconciliation; and Supplemental Financial Information  
Unaudited  
(in thousands, except per share data)  
   
    Three Months Ended     Nine Months Ended  
    September 2013     June 2013     September 2012     September 2013     September 2012  
Sales:                                        
  Product sales   $ 16,301     $ 13,617     $ 12,948     $ 40,328     $ 34,640  
  Support sales     5,032       4,222       3,113       13,015       8,418  
    Total sales     21,333       17,839       16,061       53,343       43,058  
Cost of sales:                                        
  Product cost of sales, GAAP     10,080       6,283       4,053       22,451       12,671  
    Non-GAAP adjustments:                                        
      Stock-based compensation (1)     (19 )     (20 )     (11 )     (58 )     (62 )
      Amortization of intangibles (2)     (275 )     (284 )     -       (819 )     -  
    Product cost of sales, non-GAAP     9,786       5,979       4,042       21,574       12,609  
  Support cost of sales, GAAP     896       831       487       2,442       956  
    Non-GAAP adjustments:                                        
      Stock-based compensation (1)     (82 )     (48 )     (23 )     (223 )     (36 )
    Support cost of sales, non-GAAP     814       783       464       2,219       920  
    Total cost of sales, non-GAAP     10,600       6,762       4,506       23,793       13,529  
    Gross profit, non-GAAP     10,733       11,077       11,555       29,550       29,529  
      50.3 %     62.1 %     71.9 %     55.4 %     68.6 %
Operating expenses:                                        
  Research and development     3,945       4,186       1,931       12,532       5,414  
    Non-GAAP adjustments:                                        
      Stock-based compensation (1)     (218 )     (216 )     (76 )     (934 )     (296 )
      Deferred compensation (3)     (753 )     (752 )     -       (2,193 )     -  
    Research and development, non-GAAP     2,974       3,218       1,855       9,405       5,118  
                                         
  Sales and marketing     7,322       7,349       4,573       21,293       13,053  
    Non-GAAP adjustments:                                        
      Stock-based compensation (1)     (385 )     (376 )     (296 )     (1,348 )     (942 )
      Amortization of intangibles (2)     (117 )     (124 )     -       (353 )     -  
      Deferred compensation (3)     (716 )     (716 )     -       (2,086 )     -  
    Sales and marketing, non-GAAP     6,104       6,133       4,277       17,506       12,111  
                                         
  General and administrative     2,510       3,352       2,386       9,498       6,823  
    Non-GAAP adjustments:                                        
      Stock-based compensation (1)     (365 )     (487 )     (415 )     (1,251 )     (857 )
      Business development costs (4)     -       (614 )     -       (1,616 )     (646 )
    General and administrative, non-GAAP     2,145       2,251       1,971       6,631       5,320  
    Total operating expenses, non-GAAP     11,223       11,602       8,103       33,542       22,549  
                                         
Income (loss) from operations, non-GAAP     (490 )     (525 )     3,452       (3,992 )     6,980  
                                         
Interest and other income (expense), net     232       20       161       203       108  
                                         
  Income (loss) before income taxes, non-GAAP     (258 )     (505 )     3,613       (3,789 )     7,088  
                                         
Income tax provision (benefit)     (205 )     (860 )     29       (1,688 )     141  
    Non-GAAP adjustments (5)     136       688       -       1,550       -  
  Income tax provision (benefit), non-GAAP     (69 )     (172 )     29       (138 )     141  
  Net income (loss), non-GAAP   $ (189 )   $ (333 )   $ 3,584     $ (3,651 )   $ 6,947  
                                         
Net income (loss) per share - diluted, non-GAAP   $ (0.01 )   $ (0.02 )   $ 0.18     $ (0.18 )   $ 0.39  
                                         
Shares used in computing diluted net income (loss) per share     20,031       19,997       19,801       20,007       17,824  
                                         
Reconciliation of Net Income (Loss):                                        
    U.S. GAAP as reported   $ (2,983 )   $ (3,282 )   $ 2,763     $ (12,982 )   $ 4,108  
      Non-GAAP adjustments:                                        
        Stock-based compensation (1)     1,069       1,147       821       3,814       2,193  
        Amortization of intangibles (2)     392       408       -       1,172       -  
        Deferred compensation (3)     1,469       1,468       -       4,279       -  
        Business development expenses (4)     -       614       -       1,616       646  
        Income tax adjustment (5)     (136 )     (688 )     -       (1,550 )     -  
    As Adjusted   $ (189 )   $ (333 )   $ 3,584     $ (3,651 )   $ 6,947  
              -                          
Reconciliation of Diluted Net Income (Loss) Per Share:                                        
    U.S. GAAP as reported   $ (0.15 )   $ (0.16 )   $ 0.14     $ (0.65 )   $ 0.23  
      Non-GAAP adjustments:                                        
        Stock-based compensation (1)     0.05       0.06       0.04       0.19       0.12  
        Amortization of intangibles (2)     0.02       0.02       -       0.06       -  
        Deferred compensation (3)     0.07       0.07       -       0.21       -  
        Business development expenses (4)     -       0.03       -       0.08       0.04  
        Income tax adjustment (5)     (0.01 )     (0.03 )     -       (0.08 )     -  
    As Adjusted   $ (0.01 )   $ (0.02 )   $ 0.18     $ (0.18 )   $ 0.39  
                                         
Shares used in computing diluted net income (loss) per share     20,031       19,997       19,801       20,007       17,824  
   
(1) Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of ASC 718.
(2) Amortization expense associated with intangible assets acquired in the Vineyard Networks acquisition.
(3) Deferred compensation includes amortization of amounts to be paid under retention agreements with Vineyard's three founders; these are payable after one year of continuous employment with the Company.
(4) Business development expenses include the cost of outside professional services for negotiating and performing legal, accounting and tax due diligence for potential mergers, acquisitions and other significant partnership arrangements.
(5) Income tax benefit associated with the following Vineyard acquisition related items:
  - reversal of Vineyard's pre-existing income tax valuation allowance upon acquisition; and
  - amortization of acquired intangible assets and book/tax differences on deferred revenue.
   

Contact Information

  • Investor Relations Contact
    Nicole Noutsios
    NMN Advisors (for Procera Networks)
    procera@nmnadvisors.com
    1+510-315-1003

    Media Contact
    Fran Lowe
    Engage PR (for Procera Networks)
    flowe@engagepr.com
    1+510-748-8200 x225