ONI Systems Reports Strong Third Quarter 2000 Financial Results
Near Doubling of Customer Base to 13 Fuels 73% Sequential Revenue Growth; Net Loss $(0.14) Per Share Improves from $(0.18) Per Share in Prior Quarter
SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 31, 2000-- ONI Systems(TM) Corp. (NASDAQ:ONIS - news), a leading provider of optical telecommunications systems for the metropolitan and regional markets, today reported net revenues of $16.4 million and a net loss of $(16.2) million or $(0.14) per diluted share, excluding non-recurring, non-cash charges related to the amortization of deferred stock compensation and goodwill for the quarter ending September 30, 2000.
``Our significant revenue increase this quarter reflects strong demand for our products,'' said Hugh Martin, president and CEO of ONI Systems. ``We added six new customers in the quarter and saw the majority of our existing customers purchase additional equipment to continue their network build-outs. Our win with Qwest is just one example of the demand we are now seeing from inter-exchange carriers. We have also announced several key new products--the ONLINE11000(TM), SONET/SDH Multiplexer(TM)and Data Multiplexer(TM)--that are already seeing strong customer interest. Along with the previously announced 10 gigabit per second, OC-192 capability, ONI is rapidly expanding its product offerings to meet the increasing requirements of our metro and, now, regional customers.''
``The ONLINE11000 marks a particularly important step for our company,'' added Martin. ``By bringing our successful dynamic provisioning, optical protection and transparency technologies to the fixed, point-to-point world of regional long-haul transport, we will enter this existing large market with a high degree of differentiation.''
Revenues of $16.4 million for the third quarter increased by 73% over second quarter 2000 revenues. Gross margin as a percentage of revenue for the quarter was 32.1%, up from 27.6% in the second quarter of this year. Pro forma net loss excluding non-recurring, non-cash charges related to stock compensation and goodwill was $(0.14) per diluted share for the quarter. This compares to $(0.18) per diluted share in the second quarter. Reported net loss in the third quarter was $(35.1) million or $(0.30) per diluted share versus a reported net loss of $(39.4) million or $(0.40) per diluted share in the second quarter of 2000.
Revenue for the nine months ended September 30, 2000 was $29.5 million. Reported net loss for the nine month period was $(112.9) million or $(1.01) per diluted share.
On October 23, 2000, ONI Systems completed a secondary common stock offering with the sale of 8,000,000 shares of common stock (excluding an additional 1,200,000 shares of common stock that the underwriters have the option to purchase to cover over-allotments) at $74.50 per share. Of this, 5,646,643 shares were sold by ONI Systems generating net cash proceeds to the company of $401.5 million, which will be used to fund working capital, capital expenditures and for other general corporate purposes. In addition, a portion of these proceeds may be used to acquire or invest in businesses, technologies or products that are complementary to the company's business. Concurrent with the equity offering, the company also issued $300.0 million in 5% convertible subordinated notes due in 2005 (excluding an additional $45.0 million in principal amount of notes that the underwriters have the option to purchase to cover over-allotments). Net cash proceeds of $290.3 million from the debt offering will be used for general corporate purposes.
Business Outlook
``We have reached an inflection point in our business,'' said Martin. ``The metro market demand is real and expanding and the strong interest in ONI's new products provides good customer visibility into, at least, the next several quarters.'' The company expects to see sequential revenue growth of approximately 25% in the fourth quarter of 2000 and approximately 35% for each of the first and second quarters of 2001.
``A key attribute of the metropolitan market is the significant number of potential customers. We expect to have at least twenty-four to twenty-six customers by the end of 2001, '' added Martin. The company is expecting $180 to $190 million of revenue for 2001 with continued improvements in gross margin toward a fourth quarter 2001 goal of between 45%-50%. In addition, the company expects to achieve break-even earnings per share (excluding stock compensation charges and goodwill amortization) in the fourth quarter of 2001.
Other Highlights in the Quarter
Announced a contract with metropolitan network infrastructure provider Sphera Optical Networks, Inc. Sphera has received initial shipments of ONI's ONLINE(TM) transport platform for deployment into its New York and New Jersey networks in Q4 2000.
Announced that EPIK Communications, the telecommunications subsidiary of Florida East Coast Industries, Inc. has signed a contract to purchase approximately $4 million of ONI equipment and services. EPIK has taken initial delivery of equipment, and will deploy ONI's ONLINE transport platform in Atlanta, Miami and Orlando with live traffic anticipated in Q4 2000.
Announced that Internet Initiative Japan, Inc. (NASDAQ: IIJI - news), Japan's leading Internet access and comprehensive Internet solution provider, purchased the ONLINE transport platform from ONI Systems under an equipment and services agreement valued at up to US $30 million over two years. In addition, IIJ has the option to purchase more equipment from ONI for future network builds.
Announced a multi-year contract win with Qwest Communications International Inc. (NYSE: Q - news) for optical networking equipment that will support the delivery of high-speed, local broadband connectivity to customers in a major metro market. Qwest intends to build 25 city networks by the end of 2001.
Introduced two new wavelength multiplexer products for the ONLINE transport platform, designed to maximize the available bandwidth carried within each wavelength. The SONET/SDH Multiplexer and the Data Multiplex products let carriers pack up to 16 lower-speed channels into a single wavelength, resulting in efficiencies by eliminating the need for traditional multiplexing equipment in the network. These new products will be generally available worldwide in Q4 2000 with the ONLINE9000(TM) metro core platform and the ONLINE7000(TM) metro access platform.
Recent Developments
On October 5, 2000, the company introduced its regional optical transport platform, the ONLINE11000, which will enable service providers to reliably and cost-effectively extend the reach of services delivered via scalable optical networks. The ONLINE11000 is designed to transmit optical signals up to 640 kilometers between source and destination without any need for electrical regeneration of the signals. This extended reach capability will enable the ONLINE11000 to be deployed in rings ranging from a few hundred kilometers to more than 1,000 kilometers. The ONLINE11000 is expected to become generally available for sale at the end of the fourth quarter 2000.
About ONI Systems
ONI Systems (NASDAQ: ONIS - news) develops, markets and sells all-optical networking equipment specifically designed to address bandwidth and service limitations of regional and metropolitan networks. Our products allow communications service providers to rapidly build high-capacity metro networks that are flexible, scalable and able to support multiple services on a single platform. Our products include the ONLINE11000(TM), the ONLINE9000(TM), and the ONLINE7000(TM) optical transport platforms and the SONET/SDH Multiplexer(TM) and Data Multiplexer(TM). The ONLINE(TM) optical transport platforms incorporate the OPTX(TM) operating system for wavelength and service management in optical networks and the OLMP(TM) optical link management protocol suite for internetworking between the optical transport and data or voice switching layers of the network. For more information about ONI Systems and its products, visit ONI Systems' Web site at www.oni.com.
Web Cast of Financial Results Conference Call
Our financial results conference call will be held Tuesday, October 31, 2000 at 1:30 p.m. Pacific/ 4:30 p.m. Eastern. Interested parties can access a live Internet Web Cast of the call either through ONI Systems' Web site at www.oni.com or through StreetFusion's Web site at www.streetfusion.com--ticker ``ONIS''. Please access either Web site at least 15 minutes prior to the start of the call to download and install any necessary audio software. An archived audio of the call will be available for approximately one week after the call through ONI Systems' Web site at www.oni.com.
This press release contains forward-looking information within the meaning of Section 21E of the Securities Exchange Act of 1934, and is subject to the safe harbor created by this section. Except for historical information, the matters discussed in this press release are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to, our limited operating history which makes forecasting our future revenue and operating results difficult, our ability to develop and to achieve market acceptance of new products, our dependence on a small number of customers, our ability to add additional customers and our dependence on sole or limited source suppliers for several key components. These and other risks and uncertainties are described from time-to-time in ONI Systems' filings with the Securities and Exchange Commission, including ONI Systems' report on Form 10-Q for the quarter ended June 30, 2000, ONI Systems' final Prospectuses dated October 23, 2000 for its public offerings and other documents on file with the SEC.
ONI Systems, ONLINE, ONLINE11000, ONLINE9000, ONLINE7000, OPTX, OLMP, SONET/SDH Multiplexer and Data Multiplexer are trademarks or registered trademarks of ONI Systems Corp. All other trademarks are the property of their respective owners.
ONI SYSTEMS CORP.
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS(1)
(In thousands, except per share data)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
Revenue $16,381 $742 $29,498 $1,707
Cost of goods
sold 11,126 206 20,845 964
Gross profit 5,255 536 8,653 743
Operating
expenses
Research and
development 13,469 7,147 37,814 14,443
Sales &
marketing 7,164 1,100 16,092 2,429
General and
administrative 4,364 777 11,894 1,818
Total
operating
expense 24,997 9,024 65,800 18,690
Operating loss (19,742) (8,488) (57,147) (17,947)
Other income
(expense), net 3,515 125 5,861 476
Loss before
income taxes (16,227) (8,363) (51,286) (17,471)
Income taxes -- -- 2 1
Net loss (16,227) (8,363) (51,288) (17,472)
Pro forma basic
and diluted net
loss per share ($0.14) ($0.42) ($0.46) ($1.17)
Weighted average
shares
outstanding
used in
computing basic
and diluted net
loss per share 118,774,108 20,064,946 111,738,805 14,965,123
(1) This Proforma Condensed Statements of Operations excludes the
impact of amortization of deferred stock compensation,
amortization of goodwill and intangibles, common stock warrant
expense and the beneficial conversion feature on preferred
stock.
ONI SYSTEMS CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
Revenue $16,381 $742 $29,498 $1,707
Cost of goods
sold 11,126 206 20,845 964
Gross profit 5,255 536 8,653 743
Operating
expenses
Research and
development 13,469 7,147 37,814 14,443
Sales &
marketing 7,164 1,100 16,092 2,429
General and
administrative 4,364 777 11,894 1,818
Amortization of
deferred stock
compensation 18,000 3,380 50,065 6,326
Amortization of
goodwill and
intangibles 860 807 2,734 807
Common stock
warrant expense -- -- 4,545 --
Total
operating
expense 43,857 13,211 123,144 25,823
Operating loss (38,602) (12,675) (114,491) (25,080)
Other income
(expense), net 3,515 125 5,861 476
Loss before
income taxes (35,087) (12,550) (108,630) (24,604)
Income taxes -- -- 2 1
Net loss (35,087) (12,550) (108,632) (24,605)
Beneficial
conversion of
preferred stock -- -- 4,242 --
Net loss
attributable
to common
shareholders ($35,087) ($12,550) ($112,874) ($24,605)
Basic and
diluted net
loss per share ($0.30) ($0.63) ($1.01) ($1.64)
Weighted average
shares
outstanding
used in
computing basic
and diluted net
loss per share 118,774,108 20,064,946 111,738,805 14,965,123
ONI SYSTEMS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, 2000 December 31, 1999
(unaudited)
Assets
Cash & cash equivalents $ 197,005 $ 80,023
Accounts receivable 16,218 163
Inventory 51,362 9,649
Property and equipment 37,737 5,315
Prepaid expenses and other assets 8,162 5,792
Total assets $ 310,484 $ 100,942
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $ 22,522 $ 8,681
Deferred revenue 283 --
Capital lease obligations 380 534
Total liabilities 23,185 9,215
Stockholders' equity 451,553 147,350
Accumulated deficit (164,254) (55,623)
Total stockholders equity 287,299 91,727
Total liabilities and stockholders'
equity $ 310,484 $ 100,942
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