SOURCE: Soapstone Networks

July 17, 2008 07:30 ET

Soapstone Networks Reports Second Quarter 2008 Results

BILLERICA, MA--(Marketwire - July 17, 2008) - Soapstone Networks Inc. (NASDAQ: SOAP) today reported results for its second quarter ended June 30, 2008.

Revenue for the three and six months ended June 30, 2008 was $3.9 million and $6.6 million, respectively, compared to $29.6 million and $50.2 million, respectively, for the three and six months ended June 30, 2007. The three and six months ended June 30, 2007 included $26.9 million and $45.3 million, respectively, in router product revenue. The Company shipped its last router products in December 2007 and has exited the manufacturing and sale of router products. In the current quarter the Company recorded as product revenue certain revenue deferrals from prior years' product shipments in connection with the termination of certain customer terms and conditions.

"We are extremely pleased with the progress of the PNC development and marketing, and we anticipate general availability for the product in the third quarter," said Bill Leighton, Chief Executive Officer, Soapstone Networks. "We are seeing new opportunities for the PNC as carriers continue to rapidly adopt Carrier Ethernet. Our product remains unique in the market as the next generation control plane for real-time provisioning, monitoring and controlling of heterogeneous Carrier Ethernet resources."

GAAP net loss for the second quarter ended June 30, 2008 was $4.3 million, or $0.29 per share, compared to a GAAP net income of $12.1 million, or $0.82 per share, in the prior year's second quarter. GAAP net loss in the 2008 period includes $1.0 million of non-cash equity based charges associated with Financial Accounting Standards Board Statement No. 123R ("SFAS 123R"). GAAP net income in the 2007 period includes $0.7 million of non-cash equity based charges associated with SFAS 123R partially offset by $0.1 million from the utilization of certain inventory previously written off.

GAAP net loss for the six months ended June 30, 2008 was $8.0 million, or $0.54 per share, compared to a GAAP net income of $18.1 million, or $1.24 per share, in the six months ended June 30, 2007. GAAP net loss in the 2008 period includes $1.5 million of non-cash equity based charges associated with Financial Accounting Standards Board Statement No. 123R ("SFAS 123R"). GAAP net income in the 2007 period includes $1.1 million of non-cash equity based charges associated with SFAS 123R, and $0.3 million of special charges associated with a restructuring in the first quarter of 2006, partially offset by $0.2 million from the utilization of certain inventory previously written off.

Non-GAAP net loss (GAAP net loss or income excluding charges for restructuring, certain stock based compensation and inventory credits) for the second quarter ended June 30, 2008 was $3.2 million, or $0.22 per share compared to non-GAAP net income of $12.7 million, or $0.86 per share in the second quarter of 2007.

Non-GAAP net loss for the six months ended June 30, 2008 was $6.5 million, or $0.44 per share compared to non-GAAP net income of $19.2 million, or $1.32 per share in the six month period ended June 30, 2007.

Cash, cash equivalents and marketable securities totaled $105.4 million at June 30, 2008 compared to $104.5 million at March 31, 2008.

Soapstone Networks will discuss these quarterly results as well as future business and financial expectations in an investor conference on July 17, 2008 at 8:30 AM eastern daylight savings time. The conference telephone number is (800) 230-1096. A replay of the conference call will be available after 11:15 AM. Replay information will be available at (800) 475-6701 (USA) access code: 952860. Replay of this call is also available on Soapstone's Web site, www.soapstonenetworks.com, along with a copy of this release.

Soapstone is a trademark of Soapstone Networks Inc.

This release contains information about Soapstone's future expectations, plans, and prospects, including Soapstone's expectations for annual revenue, profitability, product introduction, commercial activities and the growth opportunity for Soapstone Networks, that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Statements made with regard to interim results are not necessarily indicative of results that may be expected for future interim periods or for the full year. When used in this press release, the word "will," "expected" and other similar expressions are intended to identify such forward looking statements. Such risks and uncertainties include, but are not limited to, Soapstone's ability to manage the transition of its core router business, the early stage of Soapstone Networks, market acceptance of our products, services and enhancements, dependence on our major customer, customer purchasing patterns and commitments, development of the market place, product development and enhancement, intensity of competition of other vendors, technological changes, reliance on technology and distribution partners, and other risks set forth in Soapstone's filings with the Securities and Exchange Commission. Soapstone does not undertake any duty to update forward-looking statements.

About Soapstone Networks

Soapstone Networks Inc., headquartered in Billerica, Massachusetts is at the forefront of the movement to Carrier Ethernet by delivering resource control systems that help to realize the value of NGN software-provisioned services in the new Carrier Ethernet transport network. Soapstone's common control framework decouples services from underlying network technologies. The Soapstone solution dynamically provisions precise, SLA-quality services, continuously optimizing utilization of network resources to bring orderly, predictable business-driven behavior to service provider networks. Soapstone changed its name from Avici Systems in the first quarter of 2008. Avici has provided purpose-built carrier-class routing solutions for the Internet. Such routing systems provide IP solutions to some of the world's leading service providers. The future of Carrier Ethernet -- www.soapstonenetworks.com.

                         SOAPSTONE NETWORKS INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS
          (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                               (Unaudited)


                              Three Months Ended       Six Months Ended
                                   June 30,                June 30,
                            ----------------------  ----------------------
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------
Revenue:
     Product (1)            $    1,201  $   26,900  $    1,201  $   45,324
     Service                     2,721       2,738       5,350       4,826
                            ----------  ----------  ----------  ----------
       Total revenue             3,922      29,638       6,551      50,150

   Cost of revenue -
    Product (2)                     --       7,994          --      13,315
   Cost of revenue -
    Service (3)                  1,016         365       1,961         822
                            ----------  ----------  ----------  ----------
   Total cost of revenue         1,016       8,359       1,961      14,137
                            ----------  ----------  ----------  ----------

       Gross margin              2,906      21,279       4,590      36,013
                            ----------  ----------  ----------  ----------

   Operating expenses:
     Research and
      development (3)            4,027       6,929       7,464      14,020
     Sales and marketing (3)     1,260         674       2,402       1,260
     General and
      administrative (3)         1,542       1,674       2,912       2,941
     Stock-based compensation      978         660       1,458       1,105
     Restructuring expenses         --          --          --         100
                            ----------  ----------  ----------  ----------
       Total operating
        expenses                 7,807       9,937      14,236      19,426
                            ----------  ----------  ----------  ----------

(Loss) income from
 operations                     (4,901)     11,342      (9,646)     16,587
Interest income, net               635         965       1,576       1,851
Other Income                        --          --          87          --
Provision for income tax            --        (240)         --        (370)
                            ----------  ----------  ----------  ----------

Net (loss) income           $   (4,266) $   12,067  $   (7,983) $   18,068
                            ==========  ==========  ==========  ==========

Net (loss) earnings per
 diluted share              $    (0.29) $     0.82  $    (0.54) $     1.24
                            ==========  ==========  ==========  ==========

   Weighted average common
    shares used in computing
    diluted net (loss)
    income per share        14,825,768  14,765,241  14,808,928  14,522,034
                            ==========  ==========  ==========  ==========
(1) Revenue deferral from
     prior years' product
     shipments recorded as
     product revenue due to
     the termination of
     certain customer terms
     and conditions in the
     2008 periods.

(2) Includes inventory
     charge and (credits),
     as follows:
      Inventory and
       inventory related
       charge               $       --  $       --  $       --  $      175
      Credits from
       utilization of
       inventory previously
       written off in 2006
       and 2001             $       --  $      (73) $       --  $     (218)

(3) Excludes certain
     non-cash, stock-based
     compensation, as
     follows:
      Cost of revenue -
       Service              $       43  $       --  $       66  $       --
      Research and
       development                 383         442         588         673
      Sales and marketing          235         (43)        349          40
      General and
       administration              360         261         521         392






                         SOAPSTONE NETWORKS INC.
            NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
          (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                              (Unaudited)
                                 Note 1


                              Three Months Ended       Six Months Ended
                                   June 30,                June 30,
                            ----------------------  ----------------------
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------
Revenue:
   Product (2)              $    1,201  $   26,900  $    1,201  $   45,324
   Service                       2,721       2,738       5,350       4,826
                            ----------  ----------  ----------  ----------
      Total revenue              3,922      29,638       6,551      50,150

Cost of revenue - Product           --       8,067          --      13,358
Cost of revenue - Service          973         365       1,895         822
                            ----------  ----------  ----------  ----------
   Total cost of revenue           973       8,432       1,895      14,180
                            ----------  ----------  ----------  ----------

      Gross margin               2,949      21,206       4,656      35,970
                            ----------  ----------  ----------  ----------

Operating expenses:
   Research and development      4,027       6,929       7,464      14,020
   Sales and marketing           1,260         674       2,402       1,260
   General and administrative    1,542       1,674       2,912       2,941
                            ----------  ----------  ----------  ----------
      Total operating
       expenses                  6,829       9,277      12,778      18,221
                            ----------  ----------  ----------  ----------

(Loss) income from
 operations                     (3,880)     11,929      (8,122)     17,749
Interest income, net               635         965       1,576       1,851
Other Income                        --          --          87          --
Provision for income tax            --        (240)         --        (370)
                            ----------  ----------  ----------  ----------

Non-GAAP net (loss) income  $   (3,245) $   12,654  $   (6,459) $   19,230
                            ==========  ==========  ==========  ==========

Non-GAAP (loss) earnings
 per diluted share          $    (0.22) $     0.86  $    (0.44) $     1.32
                            ==========  ==========  ==========  ==========
Weighted average common
 shares used in computing
 diluted net (loss) income
 per share                  14,825,768  14,765,241  14,808,928  14,522,034
                            ==========  ==========  ==========  ==========

Note 1 - The above non-GAAP consolidated statements of operations for the
three and six months ended June 30, 2008 and 2007 are not presented in
accordance with generally accepted accounting principles (GAAP) and are
presented for informational purposes only.  These statements exclude the
impact of restructuring expenses, non-cash charges related certain stock
based compensation as well as charges and credits related to inventory and
related items as presented in the following reconciliation for the
applicable periods.  The Company believes that this presentation of
non-GAAP results provides helpful information to both management and
investors in assessing our core operating performance.  Such information
should not be considered superior to, in isolation from, or as a substitute
for results presented in accordance with generally accepted accounting
principles.


                              Three Months Ended       Six Months Ended
                                   June 30,                June 30,
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------
Non-GAAP net (loss) income  $   (3,245) $   12,654  $   (6,459) $   19,230
Restructuring expenses              --          --          --        (100)
Certain non-cash stock
 based compensation             (1,021)       (660)     (1,524)     (1,105)
Inventory and inventory
 related charge                     --          --          --        (175)
Utilization of inventory
 previously written-off             --          73          --         218
                            ----------  ----------  ----------  ----------

GAAP net (loss) income      $   (4,266) $   12,067  $   (7,983) $   18,068
                            ==========  ==========  ==========  ==========

Note 2 - Revenue deferral from prior years' product shipments recorded as
product revenue due to the termination of certain customer terms and
conditions in the 2008 periods.






                         SOAPSTONE NETWORKS INC.
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                             (IN THOUSANDS)
                              (Unaudited)

                                                    June 30,   December 31,
                                                  ------------ ------------
                                                      2008         2007
                                                  ------------ ------------

Assets
   Cash, Cash equivalents and marketable
    securities                                    $    105,445 $     99,988
   Trade accounts receivable, net                          300       11,769
   Other current assets                                    767          790
                                                  ------------ ------------

      Total current assets                             106,512      112,547

   Long-term marketable securities                          --        3,000
   Property and equipment, net                           3,162        3,306
   Other Non-Current Assets                                102           --
                                                  ------------ ------------
      Total assets                                $    109,776 $    118,853
                                                  ============ ============

Liabilities and Stockholders' Equity
   Accounts payable and accrued expenses          $      3,873 $      9,002
   Deferred revenue                                      4,541        2,343
   Stockholders' equity                                101,362      107,508
                                                  ------------ ------------

   Total liabilities and stockholders' equity     $    109,776 $    118,853
                                                  ============ ============

December 31, 2007 amounts are derived
from audited financial statements.

Contact Information

  • For more information, contact:
    Inna Vyadro
    Director of Investor Relations
    Soapstone Networks
    978-715-2300
    Email Contact

    William J. Stuart
    Chief Financial Officer
    Soapstone Networks
    978-715-2300
    Email Contact