CANTON, Mass., April 26, 2012 /PRNewswire/
-- NEI (Nasdaq: NEI), a leading provider of
server-based application platforms, deployment solutions and
lifecycle support services for software technology developers and
OEMs worldwide, today reported financial results for its fiscal
second quarter, the period ended March 31,
2012.
Second Quarter Financial Performance
- Net revenues were $65.9 million,
an increase compared to the $65.0
million reported for the second fiscal quarter last year and
within the guidance of $64 million to $69
million.
- EMC represented 42% of net revenues, a decrease from 59% of net
revenues for the second fiscal quarter last year and a decrease
from the 50% of net revenues reported in the first fiscal quarter
of 2012. Tektronix comprised 22% of net revenues during the
quarter, an increase from 11% of net revenues in the second fiscal
quarter last year and from the 16% of net revenues for the first
fiscal quarter this year. Symantec represented 10% of net revenues
during the quarter, down slightly from 11% of net revenues during
the first fiscal quarter. Symantec was not a customer in the
year-ago quarter.
- Gross margin was 12.5% of net revenues, above guidance of 11.0%
to 11.5% and compared to 11.6% in the second quarter last year. The
higher gross margin was the result of a more favorable customer and
product mix.
- Operating expenses were $6.2
million slightly above the guidance range of $5.6 million to $6.1 million, and compared to
$6.1 million in the year-ago second
quarter.
- Net income on a GAAP basis was $1.2
million, or $0.03 per share,
which exceeded the guidance of $600,000 to
$1.1 million, and compared to net income of $1.5 million, or $0.03 per share in the same period a year ago.
The net income for the second quarter of fiscal 2012 is inclusive
of income tax expense of $813,000,
while the year-ago quarter included income tax expense of
$60,000. As a result of the Company's
reversal of its deferred income tax valuation allowance at
September 30, 2011, NEI is now
required to record federal income tax expense, although it will be
realizing the benefit of its deferred income tax assets and
therefore substantially all of the federal income tax expense will
not require cash payments.
- Non-GAAP net income, which excludes stock-based compensation of
$88,000 and amortization expense of
$280,000, was $1.6 million, or $0.04 per share, better than the expected range
of non-GAAP profit of $1.0 million to $1.5
million. The non-GAAP net income compared to non-GAAP net
income of $2.0 million, or
$0.05 per share, in the second fiscal
quarter of 2011.
Greg Shortell, President and
Chief Executive Officer of NEI, commented, "We are pleased to
report another quarter in which we executed well and met or
exceeded our revenue and profitability targets. As an organization,
we continued to show resiliency, having mostly overcome an
industry-wide hard drive and componentry shortage related to
flooding in Thailand, and by
helping our customers meet their customer demand with minimal
interruption. Looking ahead, there are new challenges to overcome.
As we announced earlier this month, NEI was notified by EMC that
the integration of EMC standard platform products will be
transitioned away from system integrators. This transition is
expected to begin during our first fiscal quarter of 2013, giving
us an opportunity to plan and work to replace these revenues and
maintain our profitability."
"As we have done in the past, I am confident that we can
overcome these challenges," continued Mr. Shortell. "With a strong
pipeline of new business opportunities, including design wins from
2011, we have the opportunity to further diversify our customer
base. We will continue to both aggressively pursue opportunities
for growth and manage our expenses. That being said, we will not
reduce expenses to the point where our product quality, customer
service or our ability to compete for new business and grow
revenues are at risk."
For the six month period ended March 31,
2012, net revenues were $135.6
million, compared to $136.7
million for the same period in 2011. Gross margin was
$16.6 million, or 12.2% of net
revenues, compared with gross margin of $15.1 million, or 11.0% of net revenues, for the
same period last year. Total operating expenses were $12.0 million, or 8.8 percent of net revenues,
compared with $12.1 million last
year, or 8.8 percent of net revenues in the same period last year.
On a GAAP basis, the Company reported net income of $2.7 million, or $0.06 per share, compared with net income of
$2.8 million, or $0.06 per share, in the same period last year.
The Company's non-GAAP net income, which excludes stock-based
compensation and amortization expenses, was $3.5 million compared to non-GAAP net income of
$4.0 million for the same period last
year. Net income amounts include $1.8
million of income tax expenses compared to $234,000 for the same period last year for the
reason described above.
Balance Sheet
NEI finished the quarter with $7.8
million in cash and cash equivalents and $78.1 million in working capital. Accounts
receivable decreased to $42.4 million
and inventory levels decreased to $42.9
million as of March 31, 2012
compared to $46.2 million and
$44.7 million, respectively, as of
December 31, 2011. NEI also has a
$10 million bank credit facility.
Business Outlook
NEI currently anticipates the following results for its fiscal
third quarter ending June 30, 2012,
based on current forecasts from certain customers and historical
trends.
- Net revenues in the range of $51 million
to $56 million.
- Gross margin in the range of 11.0% to 11.5% of net
revenues.
- Operating expenses between $5.5 million
and $6.0 million, including an estimated $100,000 of stock-based compensation expense and
amortization expense of $280,000.
- Net income (loss) on a GAAP basis in the range of $(200,000) to $300,000, net of projected income
taxes at an effective rate of 39%.
- Net income on a non-GAAP basis in the range of $200,000 to $700,000, net of income taxes.
"Our lower revenue guidance for the June quarter is primarily
due to lower forecasts from customers serving the
telecommunications industry," stated Doug
Bryant, Chief Financial Officer. "Business in that vertical
market is project-oriented in nature and can result in fluctuating
quarterly revenues. In regards to our balance sheet, we expect to
work down our inventory level during the quarter which should
improve our cash position."
"While our policy, based on our indirect sales model visibility,
is to provide guidance one quarter ahead, due to the changes in our
business we believe it would be helpful to provide an early look
into our fourth fiscal quarter and fiscal 2013 forecasts,"
continued Mr. Bryant. "These forecasts are preliminary, and may
change as we execute our strategy, but we are providing this
additional detail on a one-time basis to help our shareholders and
other stakeholders in their modeling efforts. We expect the
September quarter's revenues to be similar to the June quarter as
the preliminary forecasts from customers selling into the
telecommunications vertical are relatively flat from the June
quarter forecasts. Looking further into the future, we currently
expect fiscal 2013 revenues to be between $200 and $250 million based on our existing
customer base, recent design wins, a strong pipeline and other new
market opportunities."
Conference Call Details
In conjunction with this announcement, NEI management will
conduct a conference call today at 10 a.m.
(ET) to discuss the Company's operating performance. The
conference call will be available live via the Internet by
accessing the NEI web site at www.nei.com on the investor relations
page. Please go to the web site at least 15 minutes prior to the
call to register, download and install any necessary audio
software.
To listen to the conference call via phone, please dial
1-877-407-9039 or 1-201-689-8470. For those who cannot access the
live broadcast, a replay will be available by dialing
1-877-870-5176 or 1-858-384-5517, and entering the passcode
"392657" from three hours after the end of the call until
12 p.m. (ET) on May 3, 2012. The archived webcast will also be
available at the NEI web site.
Important Information about Non-GAAP References
References by NEI (the "Company") to non-GAAP net income and
non-GAAP per share information refer to net income or per share
information excluding stock-based compensation expense and
amortization expense. GAAP requires that these expenses be included
in determining net income or loss and per share information. The
Company's management uses non-GAAP operating expenses, and
associated non-GAAP net income (which is the basis for non-GAAP per
share information) to make operational and investment decisions,
and the Company believes that they are among several useful
measures for an enhanced understanding of its operating results for
a number of reasons.
First, although the Company undertakes analyses to ensure that
its stock-based compensation grants are in line with peer companies
and do not unduly dilute shareholders, the Company allocates grants
and measures them at the corporate level. Second, management
excludes their financial statement effect when planning or
measuring the periodic financial performance of the Company's
functional organizations since they are episodic in nature and
unrelated to its core operating metrics. Last, we believe that
providing non-GAAP per share information affords investors a view
of results that may be more easily compared to peer companies and
enables investors to consider the Company's results on both a GAAP
and non-GAAP basis in periods when the Company is undertaking
non-recurring activities.
The Company believes these non-GAAP measures will aid investors'
overall understanding of the Company's results by providing a
higher degree of transparency for certain expenses, and providing a
level of disclosure that will help investors understand how the
Company plans and measures its own business. However, non-GAAP net
income should be construed neither as an alternative to GAAP net
income or loss or per share information as an indicator of our
operating performance nor as a substitute for cash flow from
operations as a measure of liquidity because the items excluded
from the non-GAAP measures often have a material impact on the
Company's results of operations. Therefore, management uses, and
investors should use, non-GAAP measures only in conjunction with
the Company's reported GAAP results.
About NEI
NEI is a leading provider of server-based application platforms
and lifecycle support services for software developers and OEMs
worldwide. Through its expertise and comprehensive suite of
solution design, system integration, application management, global
logistics, support, and maintenance services, NEI is redefining
application deployment solutions to provide customers with a
sustainable competitive advantage. More than a decade of appliance
innovation with the ability to provide physical, virtual and
cloud-ready solutions makes NEI one of the most trusted software
deployment partners in the industry. Founded in 1997, NEI is
headquartered in Canton,
Massachusetts, with facilities in Plano, Texas and Galway, Ireland, and trades on the NASDAQ exchange
under the symbol NEI. For more information, visit www.nei.com.
Safe Harbor for Forward-Looking Statements
Statements in this press release regarding the Company's future
financial performance, including statements regarding future net
revenues, gross margin, operating expenses including stock-based
compensation expenses and amortization expense, net income,
profitability, inventory, cash and any other statements about the
Company's management's future expectations, beliefs, goals, plans
or prospects, constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
The Company's actual results could differ materially from those
stated or implied in forward-looking statements due to a number of
factors, including those factors contained in the Company's most
recent Annual Report on Form 10-K for the year ended September 30, 2011 and the most recent Form 10-Q
for the quarter ended December 31,
2011 under the section "Risk Factors" as well as other
documents that may be filed by the Company from time to time with
the Securities and Exchange Commission. Forward-looking statements
include statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future and can be identified
by forward-looking words such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "should," "will," and
"would" or similar words. The Company assumes no obligations to
update the information included in this press release.
Contact:
Hayden IR
Peter Seltzberg
646-415-8972
peter@haydenir.com
ir@nei.com
NEI
|
Condensed Consolidated Statements of
Operations
|
(in
thousands, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
|
March
31,
|
|
March
31,
|
|
March
31,
|
|
March
31,
|
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
$
65,860
|
|
$
64,953
|
|
$
135,589
|
|
$
136,659
|
|
Cost of
revenues
|
57,613
|
|
57,397
|
|
118,986
|
|
121,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
8,247
|
|
7,556
|
|
16,603
|
|
15,078
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Engineering and development
|
1,632
|
|
1,611
|
|
3,273
|
|
3,178
|
|
|
Selling
and marketing
|
1,789
|
|
1,951
|
|
3,405
|
|
3,861
|
|
|
General
and administrative
|
2,474
|
|
2,227
|
|
4,740
|
|
4,357
|
|
|
Amortization of intangible asset
|
280
|
|
332
|
|
560
|
|
665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
6,175
|
|
6,121
|
|
11,978
|
|
12,061
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
2,072
|
|
1,435
|
|
4,625
|
|
3,017
|
|
Interest
and other income (expense), net
|
(12)
|
|
102
|
|
(144)
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
$
2,060
|
|
$
1,537
|
|
$
4,481
|
|
$
3,063
|
|
Provision
for income taxes
|
813
|
|
60
|
|
1,763
|
|
234
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
1,247
|
|
$
1,477
|
|
$
2,718
|
|
$
2,829
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
per share - basic
|
$
0.03
|
|
$
0.03
|
|
$
0.06
|
|
$
0.07
|
|
Net income
per share - diluted
|
$
0.03
|
|
$
0.03
|
|
$
0.06
|
|
$
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
used in computing basic net income per share
|
42,455
|
|
42,895
|
|
42,414
|
|
42,876
|
|
Shares
used in computing diluted net income per share
|
43,107
|
|
44,438
|
|
43,033
|
|
44,153
|
|
|
|
|
|
|
|
|
|
|
|
|
The
amounts in the table above include employee stock-based
compensation as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
|
March
31,
|
|
March
31,
|
|
March
31,
|
|
March
31,
|
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
$
23
|
|
$
34
|
|
$
46
|
|
$
71
|
|
|
|
Engineering and development
|
17
|
|
29
|
|
39
|
|
62
|
|
|
|
Selling
and marketing
|
22
|
|
81
|
|
34
|
|
153
|
|
|
|
General
and administrative
|
26
|
|
92
|
|
93
|
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
88
|
|
$
236
|
|
$
212
|
|
$
464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEI
|
Non-GAAP Financial Measures and
Reconciliations
|
(in
thousands, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
|
March
31,
|
|
March
31,
|
|
March
31,
|
|
March
31,
|
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
income
|
$
1,247
|
|
$
1,477
|
|
$
2,718
|
|
$
2,829
|
|
|
Amortization of intangible asset
|
280
|
|
332
|
|
560
|
|
665
|
|
|
Stock-based compensation
|
88
|
|
236
|
|
212
|
|
464
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
net income
|
$
1,615
|
|
$
2,045
|
|
$
3,490
|
|
$ 3,958
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP basic
net income per share
|
$
0.03
|
|
$
0.03
|
|
$
0.06
|
|
$
0.07
|
|
|
Amortization of intangible asset
|
0.01
|
|
0.01
|
|
0.01
|
|
0.01
|
|
|
Stock-based compensation
|
-
|
|
0.01
|
|
0.01
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
basic net income per share
|
$
0.04
|
|
$
0.05
|
|
$
0.08
|
|
$
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
diluted net income per share
|
$
0.03
|
|
$
0.03
|
|
$
0.06
|
|
$
0.06
|
|
|
Amortization of intangible asset
|
0.01
|
|
0.01
|
|
0.01
|
|
0.02
|
|
|
Stock-based compensation
|
-
|
|
0.01
|
|
0.01
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
diluted net income per share
|
$
0.04
|
|
$
0.05
|
|
$
0.08
|
|
$
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
used in computing GAAP and non-GAAP basic
|
|
|
|
|
|
|
|
|
|
net
income per share
|
42,455
|
|
42,895
|
|
42,414
|
|
42,876
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
used in computing GAAP and non-GAAP diluted
|
|
|
|
|
|
|
|
|
|
net
income per share
|
43,107
|
|
44,438
|
|
43,033
|
|
44,153
|
|
|
|
|
|
|
|
|
|
|
|
|
NEI
|
Condensed Consolidated Balance
Sheets
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
September 30,
|
|
|
|
2012
|
|
2011
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
$
7,822
|
|
$
19,852
|
Accounts
receivable, net
|
42,365
|
|
43,522
|
Inventories
|
42,889
|
|
24,331
|
Deferred
income taxes
|
15,001
|
|
15,001
|
Prepaid
expenses and other current assets
|
2,603
|
|
4,886
|
|
|
|
|
|
|
|
Total
current assets
|
110,680
|
|
107,592
|
|
|
|
|
|
|
Property
and equipment, net
|
2,389
|
|
2,569
|
Intangible
asset
|
4,684
|
|
5,244
|
Deferred
income taxes
|
14,337
|
|
15,855
|
Other
assets
|
127
|
|
131
|
|
|
|
|
|
|
|
|
Total
assets
|
$
132,217
|
|
$
131,391
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
$
19,613
|
|
$
23,360
|
Accrued
liabilities
|
5,507
|
|
5,749
|
Deferred
revenue
|
7,505
|
|
5,967
|
|
|
|
|
|
|
|
Total
current liabilities
|
32,625
|
|
35,076
|
|
|
|
|
|
|
Deferred
revenue
|
4,463
|
|
4,095
|
|
|
|
|
|
|
|
|
Total
liabilities
|
37,088
|
|
39,171
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
Common
stock
|
484
|
|
481
|
Treasury
stock
|
(5,823)
|
|
(5,646)
|
Additional
paid-in capital
|
200,291
|
|
199,926
|
Accumulated deficit
|
(99,823)
|
|
(102,541)
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
95,129
|
|
92,220
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
$
132,217
|
|
$
131,391
|
|
|
|
|
|
|
NEI
|
Condensed Consolidated Statements of Cash
Flows
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
|
March
31,
|
|
March
31,
|
|
March
31,
|
|
March
31,
|
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
from operating activities:
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
1,247
|
|
$
1,477
|
|
$
2,718
|
|
$
2,829
|
Adjustments to reconcile net income to cash (used in)
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
570
|
|
555
|
|
1,142
|
|
1,107
|
|
Stock-based compensation
|
|
88
|
|
236
|
|
212
|
|
464
|
|
Changed in
deferred income taxes
|
|
580
|
|
-
|
|
1,518
|
|
|
|
Other
adjustments
|
|
23
|
|
39
|
|
8
|
|
40
|
|
Changes in
operating assets and liabilities
|
|
(4,084)
|
|
(2,528)
|
|
(17,165)
|
|
(3,307)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
(used in) provided by operating activities
|
|
(1,576)
|
|
(221)
|
|
(11,567)
|
|
1,133
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
used in investing activities
|
|
(205)
|
|
(1,133)
|
|
(343)
|
|
(1,410)
|
Net cash
provided by (used in) financing activities
|
|
44
|
|
53
|
|
(120)
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
(1,737)
|
|
(1,301)
|
|
(12,030)
|
|
(215)
|
Cash and
cash equivalents, beginning of period
|
|
9,559
|
|
16,409
|
|
19,852
|
|
15,323
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents, end of period
|
|
$
7,822
|
|
$
15,108
|
|
$
7,822
|
|
$
15,108
|
SOURCE NEI