Network Engines Announces Financial Results for the First Quarter of Fiscal 2006
biz.yahoo.com
Thursday January 26, 8:01 am ET
CANTON, Mass.--(BUSINESS WIRE)--Jan. 26, 2006--Network Engines, Inc. (NASDAQ: NENG), a leading provider of storage and security server appliance products and services, today reported financial results for its fiscal first quarter ended December 31, 2005.
First Quarter Financial Performance Highlights
Net revenues of $27.3 million compared to $23.1 million in the fiscal fourth quarter of 2005, greater than guidance of $23 million to $26 million.
Gross profit of 17.1 percent of net revenues compared to 12.2 percent in the fiscal fourth quarter of 2005, greater than guidance of 14 to 16 percent.
Operating expenses of $6.6 million, which included $544,000 of stock-based compensation as this was the Company's first quarter subject to the provisions of SFAS No. 123®, were below guidance of $8.2 million to $8.5 million. Operating expenses compared to $14.2 million in the fiscal fourth quarter of 2005 that included $7.8 million of goodwill impairment and $273,000 of long-lived asset impairment charges.
Net loss on a GAAP basis was $(1.6) million, or $(0.04) per share, which included $584,000 of the above mentioned stock-based compensation charges and compared to the prior quarter net loss of $(11.1) million or $(0.29) per share, including the above mentioned $8.0 million of impairment charges. Net loss was less than the guidance of between $(3.5) million to $(4.2) million.
Beginning with the quarter ended December 31, 2005, the Company's net income (loss) and net income (loss) per share will be presented on a GAAP and non-GAAP basis. A reconciliation between GAAP and non-GAAP results has been provided in the attached financial tables. Non-GAAP net loss, which excludes stock-based compensation, impairment of goodwill, impairment of long-lived assets and restructuring charges, was $(1.0) million or $(0.03) per share for the fiscal first quarter and compared to the prior quarter non-GAAP net loss of $(3.1) million or $(0.08) per share.
Cash, cash equivalents and short-term investments totaled $36.6 million at the close of the quarter, compared to $37.4 million at the end of September and above guidance of $32 million and $34 million.
"I am pleased to report that Network Engines has demonstrated strong operational performance for the first fiscal quarter," remarked Greg Shortell, President and Chief Executive Officer of Network Engines. "The results were driven by the performance of the OEM segment, which is the core of our business. Looking forward, I believe that Network Engines has significant potential. I believe our focus on growing our OEM business and continuing to maintaining tight controls while investing in new highly synergistic appliance opportunities will provide a platform to help enable the company to establish a high growth, profitable business and build shareholder value."
OEM Appliance Operations
The OEM Appliance operations achieved increased revenue performance primarily due to strong seasonal demand associated with the storage industry. Sales of OEM appliances to EMC Corporation represented 83 percent of total net revenues in the fiscal first quarter compared to 81 percent in the fiscal fourth quarter of 2005. Revenues from non-EMC customers were $4.3 million which was flat from the prior quarter and an increase from $3.7 million in the 2005 fiscal first quarter.
Distribution Operations
Network Engines' Distribution operations have been comprised of the Company's NS Series family of security appliances powered by Microsoft's Internet Security and Acceleration (ISA) Server 2004 since October 2004.
Recent key accomplishments in its distribution business include:
Expanded the suite of NS Security Appliances platforms while integrating the Websense Security Suite software.
Recently announced distribution agreement with Ingram Micro, the world's largest technology distributor.
Established relationship with security distributor, Fusion Distribution, extending the company's reach to the Middle East.
Attained Gold Certified status in the Microsoft Partner Program with three competencies;
-- Independent Software Vendor (ISV) Software Solutions
-- Networking Infrastructure Solutions
-- Advanced Infrastructure Solutions.
"Network Engines has successfully established itself as a leading appliance company and as it's newly appointed CEO, I look forward to enhancing the company's opportunities and managing the challenges ahead," continued Shortell. "The company's relationships with OEM customers are strong and we are pursuing opportunities to diversify our OEM customer base and expand our engagements with existing customers. In addition, the company has done a good job of establishing a solid foundation for sales of our NS Series Security Appliances in the first year of entering the market. Our partnership with Microsoft is a key differentiator, and looking forward I intend to enhance our collaboration with them, develop key channel partner relationships, and focus our marketing efforts to increase sales performance. We are moving forward as a company and recognize there is a significant amount of work to be done during this investment phase of the business."
Business Outlook
Network Engines currently anticipates the following results for its fiscal second quarter ending March 31, 2006, based on current forecasts from certain partners, historical and seasonal trends.
Net revenues are expected to be in the range of $24 million to $27 million.
Gross profit in the range of 14 percent to 16 percent of net revenues.
Operating expenses between $7.8 million and $8.2 million with approximately $700,000 of that estimated to be stock-based compensation expense related to SFAS No. 123®.
Net loss on a GAAP basis between $3.4 million to $3.8 million including approximately $700,000 of stock--based compensation expense.
Net loss on a non-GAAP basis, which excludes the estimated stock-based compensation, between $2.7 million and $3.1 million.
Cash, cash equivalents and short-term investments of between $32 million and $34 million.
"During the quarter, our balance sheet remained strong with cash higher than anticipated due to deferred operating and capital spending," stated Doug Bryant, Vice President of Finance and Administration and Chief Financial Officer. "Looking forward, revenue estimates remain highly reflective of anticipated orders from our OEM customers and expected seasonality in the storage market." |
