KING OF PRUSSIA, Pa., Feb. 1, 2006 (PRIMEZONE) -- Neoware, Inc. (Nasdaq:NWRE), the leading supplier of enterprise thin client solutions and related software and services that make computing more secure, reliable, affordable and manageable, today reported all-time record revenues for its second fiscal quarter ended December 31, 2005.
"Neoware is reporting another quarter of record financial results as a result of robust demand for our thin client solutions," commented Michael Kantrowitz, Neoware's Chairman and CEO.
FY06 Q2 Financial Highlights: - Revenues increased 43% to $29,337,000 from $20,471,000 in the prior year second quarter. - Gross profit was $12,905,000, or 44% of revenue, compared to $8,745,000, or 43% of revenue, in the prior year second quarter. Excluding amortization of acquisition-related intangibles and stock-based compensation, non-GAAP gross profit was 45% of revenue in the December 2005 quarter, compared to 44% of revenue in the prior year quarter. - Operating expenses were $9,244,000, or 32% of revenue, compared to $5,594,000, or 27% of revenue, in the prior year second quarter. Excluding amortization of acquisition-related intangibles and stock option expense, non-GAAP operating expenses were $7,991,000, or 27% of revenue, compared to $5,375,000, or 26% of revenue, in the prior year second quarter. - GAAP net income per share for the quarter was $.15 per diluted share, compared to $.13 per diluted share, in the prior year second quarter. - Non-GAAP net income per share for the quarter increased 57% to $.22 per fully diluted share, compared to $.14 per fully diluted share, in the year ago quarter. Non-GAAP net income excludes amortization of acquisition-related intangibles and stock based compensation and applies pro forma tax rates of 33% and 34% in the second quarter of fiscal 2006 and 2005, respectively, for the purpose of showing a comparable view of the Company's performance from period to period.
"Neoware's strong financial performance is driven by increasing demand for our thin client solutions," commented Mr. Kantrowitz. "Neoware's products address some of the most important challenges faced by CIOs today by enhancing security, improving manageability and lowering total cost of ownership. These benefits continue to accelerate Neoware thin client adoption by enterprises around the globe."
"In November, we closed our acquisition of Maxspeed Corporation, and in January we completed the integration of Maxspeed into our global business. For the December quarter, Maxspeed contributed approximately $800,000 of revenue; and consistent with our past practice, we will not be able to report this separately in future periods, as the Maxspeed products, customers and technologies have now been integrated into our business and can no longer be separately measured."
"After completing this and the other global acquisitions we announced in 2005, Neoware now has sales and integration centers in the U.S., Austria, Australia, China, France, Germany, India, and the U.K., which gives us the ability to engage with large enterprise customers and to integrate our thin client software into their IT infrastructure."
"Neoware has built successful partnerships with other industry leaders, and these partnerships continue to deliver excellent results. Our alliances with IBM and Lenovo delivered significant enterprise business in the quarter, and represented a new record. We believe that Neoware's new, global organization gives us even greater ability to capitalize on these alliances, as well as the opportunity to create new ones," Mr. Kantrowitz concluded.
FY06 Guidance:
Based upon performance for the fiscal 2006 year-to-date period and currently available information, the Company is updating its guidance for the balance of fiscal 2006 as follows:
- Revenues for the fiscal year are expected to be approximately $114 million, up from the Company's prior guidance of $110 million, reflecting growth of approximately 45% from fiscal 2005. - Gross profit margins are expected to be in the range of 40% to 45% for the year. - Non-GAAP operating expenses, excluding stock option expense and amortization of acquisition-related intangibles, are expected to remain below 30%, and to be leveraged as revenues grow. - Acquisition-related amortization is expected to be approximately $350,000 per quarter in cost of sales and approximately $600,000 in operating expenses. - Stock option expense is expected to be approximately $25,000 per quarter in cost of sales and approximately $725,000 per quarter in operating expenses, subject to additions should we make additional grants in fiscal 2006. - The Company's GAAP effective tax rate is expected to be 36% and the non-GAAP rate, which excludes the impact of non-deductible stock option expense related to incentive stock options for fiscal 2006, to be 33%.
CONFERENCE CALL INFORMATION
Neoware will host a conference call at 5:00 PM on February 1, 2006. The conference call will be available live at www.vcall.com and on the Neoware website at www.neoware.com. To participate, please go to the website 10 minutes prior to the call to register, download and install any necessary audio software. If you are unable to attend the live conference call, an Internet replay of the call will be archived and available after the call.
The call will also be accessible by dialing 1-800-974-9436 in the US and +1-641-297-7617 for international calls. The conference ID will be NEOWARE. A replay of the call will be available through March 1, 2006 by dialing 1-800-645-7959 in the US and +1-641-297-7300 internationally and entering the passcode: 9436, then press the pound key. A copy of the press release announcing the Company's earnings and other financial and statistical information about the period to be presented in the conference call will be available at the section of the Company's website entitled "News" at www.neoware.com.
Non-GAAP Financial Measures
In this earnings release and during our earnings conference call as described above, we use or plan to discuss certain financial measures which are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States, or GAAP. A reconciliation between non-GAAP and GAAP measures can be found in the accompanying schedule and in the News section of our web site at www.neoware.com. We have provided the non-GAAP measures in order to present information about the Company's financial performance, as we believe it provides a more accurate view of the financial performance of the Company's core business and trends relating to its financial condition and results of operations including its cash requirements for ongoing operating activities. We compute non-GAAP net income by adjusting GAAP net income before taxes for amortization of acquired intangible assets such as intellectual property, customer lists and non-compete agreements, and stock-based compensation. We compute non-GAAP gross profit and operating expenses by adjusting the respective GAAP amounts for amortization of acquired intangible assets and stock based compensation. In addition, we used pro-forma tax rates of 33% and 34% the second quarter of fiscal 2006 and 2005, respectively. This compares to GAAP effective tax rates for the same periods of 36% and 34% for the 2006 and 2005 second quarter periods, respectively.
About Neoware
Neoware, Inc. (Nasdaq: NWRE) is the leading supplier of enterprise thin client solutions and related software and services that make computing more secure, reliable, affordable and manageable. By employing open technologies and eliminating the obsolescence built into standard personal computer architectures, Neoware helps enterprises leverage server-based computing architectures to increase security and reliability, enhance flexibility, as well as lower their total cost of ownership.
Neoware's software products enable enterprises to gain control of their desktops, stream software on-demand, and to integrate mainframe, midrange, UNIX and Linux applications with Windows(r) environments and the Web. Its thin client appliances and software enable enterprises to run applications on servers and display them across wired or wireless networks on secure, managed, reliable appliances that cost as little as one-fourth the price of today's typical business personal computer. The company's global development, services, and support provide customers with personalized solutions that facilitate their specialized computing needs.
Neoware's products are available worldwide from IBM and Lenovo, as well as from select, knowledgeable resellers. More information about Neoware can be found on the Web at http://www.neoware.com or via email at info@neoware.com. Neoware's global headquarters are in King of Prussia, PA, USA.
Neoware is a registered trademark of Neoware, Inc. All other names products and services are trademarks or registered trademarks of their respective holders.
# # #
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding: the increasing demand for our products; the continued acceleration of adoption of our products by customers worldwide; the impact of our expanded global organization on our ability to engage with large enterprises and on our current and future alliances; our projected revenue, gross profit margins, operating expenses, acquisition-related amortization, stock option expense and effective tax rates for the balance of fiscal year. These forward-looking statements involve risks and uncertainties. Factors that could cause actual results to differ materially from those predicted in such forward-looking statements include: our inability to manage our expanded organization; our inability to successfully integrate our recent acquisitions; the timing and receipt of future orders; our timely development and customers' acceptance of our products, including our new products; pricing pressures; rapid technological changes in the industry; growth of overall thin client sales through the capture of a greater portion of the PC market, including sales to large enterprise customers; our ability to maintain our partnerships; our dependence on our suppliers and distributors; increased competition; our continued ability to sell our products through Lenovo to IBM's customers; our ability to attract and retain qualified personnel, including the former employees of the businesses we acquired; adverse changes in customer order patterns; our ability to identify and successfully consummate and integrate future acquisitions; adverse changes in general economic conditions in the U. S. and internationally; risks associated with foreign operations; and political and economic uncertainties associated with current world events. These and other risks are detailed from time to time in Neoware's periodic reports filed with the Securities and Exchange Commission, including, but not limited to, our annual report on Form 10-K for the year ended June 30, 2005 and our quarterly reports on Forms 10-Q for the quarters ended September 30, 2005 and December 31, 2005.
Neoware is a trademark of Neoware, Inc. All other names products and services are trademarks or registered trademarks of their respective holders.
NEOWARE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
December 31, June 30,
ASSETS 2005 2005
--------- ---------
Current assets:
Cash and cash equivalents $ 10,093 $ 8,285
Short-term investments 23,827 34,874
Accounts receivable, net 23,349 17,165
Inventories 5,546 3,051
Prepaid expenses and other 1,405 2,627
Deferred income taxes 1,015 1,015
--------- ---------
Total current assets 65,235 67,017
Goodwill 42,923 31,223
Intangibles, net 13,808 9,386
Other 539 --
Property and equipment, net 1,217 416
--------- ---------
$ 123,722 $ 108,042
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,631 $ 8,408
Accrued compensation and benefits 3,094 2,018
Restructuring reserve 1,076 --
Other accrued expenses 3,732 3,166
Income taxes payable -- 2,290
Deferred revenue 1,165 734
--------- ---------
Total current liabilities 18,698 16,616
Deferred income tax 2,824 1,151
Deferred revenue 287 306
--------- ---------
Total liabilities 21,809 18,073
--------- ---------
Stockholders' equity:
Preferred stock -- --
Common stock 17 16
Additional paid-in capital 82,910 74,577
Treasury stock, 100,000 shares at cost (100) (100)
Accumulated other comprehensive income (656) 118
Retained earnings 19,742 15,358
--------- ---------
Total stockholders' equity 101,913 89,969
--------- ---------
$ 123,722 $ 108,042
========= =========
NEOWARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
Net revenues $ 29,337 $ 20,471 $ 55,880 $ 36,774
Cost of revenues
Cost of products 16,130 11,569 31,699 20,680
Amortization of intangibles 302 157 575 258
-------- -------- -------- --------
Total cost of revenues 16,432 11,726 32,274 20,938
-------- -------- -------- --------
Gross profit 12,905 8,745 23,606 15,836
-------- -------- -------- --------
Operating expenses
Sales and marketing 4,379 2,959 8,536 5,892
Research and development 1,591 769 2,886 1,433
General and administrative 2,797 1,647 5,095 3,005
Amortization of intangibles 477 219 793 389
-------- -------- -------- --------
Operating expenses 9,244 5,594 17,310 10,719
-------- -------- -------- --------
Operating income 3,661 3,151 6,296 5,117
Foreign exchange gain (loss) 52 (214) 63 (237)
Interest income, net 247 193 491 352
-------- -------- -------- --------
Income before income taxes 3,960 3,130 6,850 5,232
Income taxes 1,419 1,064 2,466 1,779
-------- -------- -------- --------
Net income $ 2,541 $ 2,066 $ 4,384 $ 3,453
======== ======== ======== ========
Earnings per share:
Basic $ .15 $ .13 $ .27 $ .22
======== ======== ======== ========
Diluted $ .15 $ .13 $ .26 $ .21
======== ======== ======== ========
Weighted average shares
outstanding:
Basic 16,492 15,754 16,383 15,726
======== ======== ======== ========
Diluted 17,088 16,188 16,718 16,111
======== ======== ======== ========
NEOWARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
Cash flows from
operating activities:
Net income $ 2,541 $ 2,066 $ 4,384 $ 3,453
Adjustments to reconcile
net income to net cash
provided by operating
activities -
Income tax benefit, primarily
from stock option exercises -- 101 -- 121
Depreciation 79 66 168 130
Amortization of intangibles 779 376 1,367 647
Non-cash share-based
compensation 797 -- 1,517 --
Changes in operating assets
and liabilities - net of
effect from acquisition -
Accounts receivable (5,048) (2,508) (5,458) (2,742)
Inventories 1,632 (2,139) 1,044 (3,052)
Prepaid expenses and other 1,289 689 1,892 796
Accounts payable 335 275 205 (1,364)
Accrued expenses (1,931) 1,336 (4,141) 1,886
Deferred revenue 415 338 421 285
-------- -------- -------- --------
Net cash provided by
operating activities 888 600 1,399 160
-------- -------- -------- --------
Cash flows from investing
activities:
Purchase of Visara thin
client business (2,107) (24) (2,107) (3,799)
Purchase of TeleVideo thin
client business (3,520) -- (3,520) --
Acquistion of Maxspeed (11,794) -- (11,794) --
Purchase of short-term
investments (12,538) (2,333) (13,438) (20,233)
Sales of short-term
investments 21,112 24,815 25,362 42,184
Purchases of property
and equipment (644) (47) (818) (66)
-------- -------- -------- --------
Net cash provided by
(used in) investing
activities (9,491) 22,411 (6,315) 18,086
-------- -------- -------- --------
Cash flows from financing
activities:
Exercise of stock options
and warrants 5,215 666 5,376 735
Excess tax benefit related
to stock options 994 -- 1,440 --
-------- -------- -------- --------
Net cash provided by
financing activities 6,209 666 6,816 735
-------- -------- -------- --------
Effect of foreign exchange
rate changes on cash (62) 135 (92) 186
-------- -------- -------- --------
Increase (decrease) in
cash and cash equivalents (2,456) 23,813 1,808 19,167
Cash and cash equivalents,
beginning of period 12,549 12,473 8,285 17,119
-------- -------- -------- --------
Cash and cash equivalents,
end of period $ 10,093 $ 36,286 $ 10,093 $ 36,286
======== ======== ======== ========
Supplemental disclosures:
Cash paid for income taxes $ 1,545 $ 15 $ 4,192 $ 46
NEOWARE SYSTEMS, INC.
RECONCILIATION OF GAAP TO NON GAAP AMOUNTS
(in thousands, except per share data)
(unaudited)
Three Months Ended Three Months Ended
December 31, 2005 December 31, 2004
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Net revenues $29,337 -- $29,337 $20,471 -- 20,471
Cost of revenues
Cost of products 16,130 (21)A 16,109 11,569 --A 11,569
Amortization of
intangibles 302 (302)B -- 157 (157)B --
Total cost of
revenue 16,432 (323) 16,109 11,726 (157) 11,569
Gross profit 12,905 323 13,228 8,745 157 8,902
Gross profit
percentage 44.0% 45.1% 42.7% 43.5%
Operating expenses
Sales and
marketing 4,379 (295)A 4,084 2,959 --A 2,959
Research and
development 1,591 (102)A 1,489 769 --A 770
General and
administrative 2,797 (379)A 2,418 1,647 --A 1,646
Amortization of
intangibles 477 (477)B -- 219 (219)B --
Operating
expenses 9,244 (1,253) 7,991 5,594 (219) 5,375
Operating
income 3,661 1,576 5,237 3,151 376 3,527
Percentage
of revenue 12% 18% 15% 17%
Foreign exchange
gain (loss) 52 -- 52 (214) -- (214)
Interest income, net 247 -- 247 193 -- 193
Income before
income taxes 3,960 1,576 5,536 3,130 376 3,506
Income taxes 1,419 409C 1,828 1,064 128C 1,192
Net income $2,541 $1,167 $3,708 $2,066 $248 $2,314
Earnings per
share - diluted $0.15 $0.07 $0.22 $0.13 $0.02 $0.14
Weighted average
shares outstanding
- diluted 17,088 17,088 17,088 16,188 16,188 16,188
A - To exclude the effect of stock-based compensation expense.
B - To exclude the effects of the amortization of intangible assets
related to business combinations.
C - To exclude the tax effect of stock-based compensation expense and
amortization of intangible assets based on effective tax rates of 33%
and 34% for the three month ended December 31, 2005 and 2004,
respectively.
NEOWARE SYSTEMS, INC.
RECONCILIATION OF GAAP TO NON GAAP AMOUNTS
(in thousands, except per share data)
(unaudited)
Six Months Ended Six Months Ended
December 31, 2005 December 31, 2004
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Net revenues $55,880 -- $55,880 $36,774 -- $36,774
Cost of revenues
Cost of products 31,699 (40)A 31,659 20,680 --A 20,680
Amortization of
intangibles 575 (575)B -- 258 (258)B --
Total cost of
revenue 32,274 (615) 31,659 20,938 (258) 20,680
Gross profit 23,606 615 24,221 15,836 258 16,094
Gross profit
percentage 42.2% 43.3% 43.1% 43.8%
Operating expenses
Sales and
marketing 8,536 (545)A 7,991 5,892 --A 5,892
Research and
development 2,886 (207)A 2,679 1,433 --A 1,433
General and
administrative 5,095 (725)A 4,370 3,005 --A 3,005
Amortization of
intangibles 793 (793)B -- 389 (389)B --
Operating
expenses 17,310 (2,270) 15,040 10,719 (389) 10,330
Operating income 6,296 2,885 9,181 5,117 647 5,764
Percentage of
revenue 11% 16% 14% 16%
Foreign exchange
gain (loss) 63 -- 63 (237) -- (237)
Interest income, net 491 -- 491 352 -- 352
Income before
income taxes 6,850 2,885 9,735 5,232 647 5,879
Income taxes 2,466 747C 3,213 1,779 221C 2,000
Net income $4,384 $2,138 $6,522 $3,453 $426 $3,879
Earnings per
share - diluted $0.26 $0.13 $0.39 $0.21 $0.03 $0.24
Weighted average
shares outstanding
- diluted 16,718 16,718 16,718 16,111 16,111 16,111
A - To exclude the effect of stock-based compensation expense.
B - To exclude the effects of the amortization of intangible assets
related to business combinations.
C - To exclude the tax effect of stock-based compensation expense and
amortization of intangible assets based on effective tax rates of
33% and 34% for the six month ended December 31, 2005 and 2004,
respectively.