Network Engines Announces Financial Results for the Third Quarter of Fiscal 2005
biz.yahoo.com
Thursday July 21, 8:03 am ET
Solid OEM Performance and Continued Progress in NS Series Sales Channel Development
CANTON, Mass.--(BUSINESS WIRE)--July 21, 2005--Network Engines, Inc. (NASDAQ: NENG), a leading provider of storage and security server appliance products and services, today reported financial results for the period ended June 30, 2005, its fiscal third quarter of 2005. Financial results were in line with or exceeded previously announced expectations.
Third Quarter Financial Performance Highlights
Net revenues of $24.3 million compared to $23.7 million in the fiscal second quarter of 2005 were in line with guidance of $23 million to $26 million.
Gross profit of 16.8 percent of net revenues compared to 21.6 percent in the second quarter of fiscal 2005 and in line with guidance of 15 to 17 percent.
Operating expenses for the quarter were $6.2 million compared to $6.5 million in the fiscal second quarter of 2005, and better than guidance of $6.6 million to $7.0 million.
Net loss on a GAAP basis was $(1.8) million, or $(0.05) per share, better than the expected net loss of $(2.6) million to $(3.0) million. Net loss for the quarter compared to a net loss of $(1.1) million, or $(0.03) per share, in the second quarter of fiscal 2005.
Cash, cash equivalents and short-term investments totaled $40.3 million at the close of the quarter, compared to $44.7 million at March 31, 2005 and in line with guidance of between $39 million and $41 million.
"During the June quarter, we continued to execute on our growth strategy and are pleased with our progress to date," commented John Curtis, President and Chief Executive Officer of Network Engines. "Our OEM business continued to perform solidly and we made important strides in developing our sales channel for our NS Series Security Appliances both in Europe and North America. We remain excited about the opportunities ahead of us."
OEM Appliance Operations
Sales of OEM appliances to EMC Corporation were 83 percent of total net revenues in the fiscal third quarter compared to 85 percent in the fiscal second quarter of 2005. The Company continued to work closely with its roster of other top tier OEM partners such as Nortel, Network Intelligence, Computer Associates, SurfControl and Borderware. During the quarter the Company also signed two new customers for its unique value-add services.
Distribution Operations
Following the Company's exit from the business of selling third-party data storage networking products in December 2004, the distribution business is comprised of Network Engines' NS Series family of security appliances, powered by Microsoft's Internet Security and Acceleration (or ISA) Server 2004. As noted in last quarter's release, the Company is not providing a financial breakdown for its Distribution Operations until it has reached a more meaningful volume of NS Series sales.
During the quarter, the Company's key accomplishments in its distribution business included:
Launched ENGAGE program for NS Series reseller partners in North America, providing them with competitive discounts, incentives, training and support.
Developed and rolled out a formal training program for North America NS Series partners.
Commenced development of European market opportunity with InTechnology, establishing a core sales channel in the UK and rolling out into continental Europe with launches in Spain, Italy and France.
Announced general release of enhancements to Network Engines' proprietary NEWS intellectual property that enable higher availability and improved management of NS Series Appliances.
Launched the Network Engines ISA Plug-in Cooperative Enforcement (NICE) program for Microsoft ISA Server 2004 interoperability, providing a single framework for multiple third-party products to integrate with NS Series Appliances.
Announced SurfControl, a provider of multi-layered Internet security technology, as the first member of the NICE program.
"In April we indicated that we had an effective foundation in place for our channel sales infrastructure, including senior sales leadership for both Europe and North America," continued Curtis. "I am pleased to report that in the third quarter both sales teams have done an outstanding job of beginning to build effective sales operations that will support our future growth. We now have a platform of key trained partners in place in the U.K. and North America, and we have started to generate sales and build a pipeline of qualified prospects. Although we are still in the early stages of developing the NS Series opportunity, our growing insight into the NS Series market and increasingly effective relationships with our channel partners give us confidence that our progress will continue in the coming quarters."
Business Outlook
Network Engines currently anticipates the following results for its fiscal fourth quarter ending September 30, 2005, based on current forecasts from certain partners, historical and seasonal trends.
Net revenues in the range of $20 million to $23 million, primarily attributable to OEM Appliance operations.
Gross profit in the range of 11 percent to 13 percent of net revenues.
Operating expenses between $6.7 million and $7.1 million.
Net (loss) on a GAAP basis between a net loss of $(3.8) million to a net loss of $(4.2) million.
Cash, cash equivalents and short-term investments of between $36 million and $38 million.
"Given the current high concentration of our OEM business, our gross margins and profitability are sensitive to changes in its product mix," stated Doug Bryant, Vice President of Finance and Administration and Chief Financial Officer. "We still anticipate continued variability from quarter to quarter and limited visibility beyond a quarter. However, as a result of the progress we are making on the NS Series opportunity, combined with our strong balance sheet, we believe the opportunity ahead of us fully warrants our ongoing investment." |
