Procera® Networks Inc. (NYSE Amex: PKT), a developer of Evolved
Deep Packet Inspection (DPI) solutions providing traffic awareness,
control and protection for complex networks, announced its earnings
for its second quarter ended June 30, 2009 (Q2'09).
Q2'09 Key Highlights:
-- Focus on Tier 1 service providers achieves record bookings of $7.1
million
-- Announced initial $5.4M purchase order from a major Tier 1 Service
Provider
-- Fifth consecutive quarter of year-over-year revenue growth
-- Revenue of $3.2 million; increased 24% year-over-year and 10%
sequentially
-- Gross margin impacted by charges; underlying gross margin rate
remained strong
-- Reduced operating expenses 30% year-over-year
"Our achievements in the second quarter were significant. We
expect the magnitude of our Tier 1 win will be felt across all
regions and verticals," said James Brear, president and CEO of
Procera. "This win, along with our continued success in the Higher
Education market, validates our technology leadership."
Total revenue for Q2'09 was $3.2 million, an increase of 24%
from $2.6 million of revenue reported in the second quarter of 2008
(Q2'08). The GAAP net loss for Q2'09 was $4.3 million, or a loss of
$(0.05) per diluted share. This compares to a GAAP net loss of $3.9
million, or a loss of $(0.05) per diluted share, in Q2'08.
Non-GAAP net loss for Q2'09 was $1.7 million, as compared to
non-GAAP net loss for Q2'08 of $2.9 million.
An archive of the August 12, 2009 conference call will be
available at the Investor Relations section of Procera Networks'
website, www.proceranetworks.com, by no later than August 14,
2009.
Forward Looking Statements
Safe Harbor Statement: this press release contains
forward-looking statements, including statements relating to the
expected demand for Procera Networks' products and services and the
recently announced purchase order from a Tier 1 service provider.
These forward-looking statements involve risks and uncertainties,
as well as assumptions that, if they do not fully materialize or
prove incorrect, could cause our results to differ materially from
those expressed or implied by such forward-looking statements,
including risks related to the testing and acceptance of our
products under the Tier 1 purchase order and during the trial
period; our ability to raise capital; the acceptance and adoption
of our products; our ability to service and upgrade our products;
lengthy sales cycles and lab and field trial delays by service
providers; our dependence on a limited product line; our dependence
on key employees; our ability to compete in our industry with
companies that are significantly larger and have greater resources;
our ability to protect our intellectual property rights in a global
market; our ability to manufacture product quickly enough to meet
potential demand; and other risks and uncertainties described more
fully in our documents filed with or furnished to the Securities
and Exchange Commission. More information about these and other
risks that may impact Procera Networks' business are set forth in
our Forms 10-Qs filed in 2009 and our Form 10-K filed for the year
ended December 31, 2008. All forward-looking statements in this
press release are based on information available to us as of the
date hereof, and we assume no obligation to update these
forward-looking statements.
Use of Non-GAAP Financial Information
To supplement our financial results presented in accordance with
Generally Accepted Accounting Principles (GAAP), this press release
and the accompanying tables and the related earnings conference
call contain certain non-GAAP financial measures that we believe
are helpful in understanding our past financial performance and
future results. For reconciliations of these non-GAAP financial
measures to the most directly comparable GAAP financial measures,
please see the section of the accompanying tables titled, "GAAP to
Non-GAAP Reconciliations." Our non-GAAP financial measures are not
meant to be considered in isolation or as a substitute for
comparable GAAP measures and should be read in conjunction with our
consolidated financial statements prepared in accordance with GAAP.
Our management regularly uses our supplemental non-GAAP financial
measures internally to understand and manage our business and
forecast future periods. Our non-GAAP financial measures include
adjustments based on the following items, as well as the related
income tax benefits, if any:
Amortization of intangible assets: We have excluded the effect
of amortization of intangible assets from our non-GAAP net income.
Amortization of intangible assets is a non-cash expense, and it is
not part of our core operations. Investors should note that the use
of intangible assets contributed to revenues earned during the
periods presented and will contribute to future period revenues as
well.
Stock-based compensation expenses: We have excluded the effect
of stock-based compensation from our non-GAAP gross profit,
operating expenses and net income measures. Although stock-based
compensation is a key incentive offered to our employees, we
continue to evaluate our business performance excluding stock-based
compensation expenses. Stock-based compensation expenses will recur
in future periods.
Non-cash interest expense: We have excluded the effect of a
non-cash charge to interest expense for the amortization of
discounts related to convertible promissory notes that were issued
and converted within Q2'09.
About Procera Networks Inc.
Procera Networks Inc. delivers Evolved DPI solutions that give
service providers awareness, control and protection of their
applications and networks. Its core product suite, the PacketLogic
line of platforms, leverages the company's advanced identification
engine, DRDL(TM) (Datastream Recognition Definition Language), to
provide accurate identification of network traffic in real-time.
PacketLogic is deployed at more than 400 broadband service
providers, telcos, governments and higher education campuses
worldwide. Founded in 2002, Procera (NYSE Amex: PKT) is based in
Silicon Valley and has offices around the globe. More information
is available at www.proceranetworks.com.
Procera Networks is a registered trademark, and PacketLogic and
DRDL are trademarks of Procera Networks, Inc. All rights reserved.
All other products or brands mentioned are trademarks and/or
service marks of their respective owners.
Procera Networks, Inc.
Condensed Consolidated Statements of Operations
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Sales
Product sales $ 2,550,845 $ 2,205,002 $ 4,721,888 $ 3,538,766
Support sales 682,874 410,296 1,459,165 792,306
----------- ----------- ----------- -----------
Total sales 3,233,719 2,615,298 6,181,053 4,331,072
Cost of sales
Product cost of sales 2,270,580 1,304,905 3,939,328 2,393,744
Support cost of sales 85,317 155,925 204,489 298,144
----------- ----------- ----------- -----------
Total cost of sales 2,355,897 1,460,830 4,143,817 2,691,888
----------- ----------- ----------- -----------
Gross profit 877,822 1,154,468 2,037,236 1,639,184
----------- ----------- ----------- -----------
27.1% 44.1% 33.0% 37.8%
Operating expenses:
Research and
development 683,307 1,026,411 1,319,449 1,688,533
Sales and marketing 1,653,930 2,344,136 3,338,791 4,368,477
General and
administrative 1,389,595 1,971,059 2,719,040 3,496,152
----------- ----------- ----------- -----------
Total operating
expenses 3,726,832 5,341,606 7,377,280 9,553,162
----------- ----------- ----------- -----------
Loss from operations (2,849,010) (4,187,138) (5,340,044) (7,913,978)
----------- ----------- ----------- -----------
Other income (expense)
Interest and other
income 12,309 14,585 25,269 25,883
Interest and other
expense (1,730,657) (26,562) (1,767,453) (34,803)
----------- ----------- ----------- -----------
Total other income
(expense) (1,718,348) (11,977) (1,742,184) (8,920)
Loss before income
taxes (4,567,358) (4,199,115) (7,082,228) (7,922,898)
Income tax benefit 234,763 282,545 415,580 522,391
----------- ----------- ----------- -----------
Net loss $(4,332,595) $(3,916,570) $(6,666,648) $(7,400,507)
=========== =========== =========== ===========
Net loss per share -
basic and diluted $ (0.05) $ (0.05) $ (0.08) $ (0.10)
=========== =========== =========== ===========
Shares used in
computing net loss per
share-basic and
diluted 86,943,149 77,119,655 85,687,768 76,618,915
Procera Networks, Inc.
Condensed Consolidated Balance Sheets
June 30, December 31,
2009 2008
------------ ------------
ASSETS Unaudited
Current Assets:
Cash and cash equivalents $ 2,303,901 $ 1,721,225
Accounts receivable, net of allowance 5,686,469 5,454,745
Inventories, net 2,925,337 3,445,802
Prepaid expenses and other 627,457 824,340
------------ ------------
Total current assets 11,543,164 11,446,112
Property and equipment, net 1,216,342 2,573,045
Purchased intangible assets, net 244,905 964,405
Goodwill 960,209 960,209
Other non-current assets 47,600 47,294
------------ ------------
Total assets $ 14,012,220 $ 15,991,065
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,629,220 $ 2,457,430
Deferred revenue 1,560,735 1,313,092
Accrued liabilities 1,355,587 1,841,442
Notes payable 650,000 550,000
Capital leases payable - 11,543
------------ ------------
Total current liabilities 5,195,542 6,173,507
Non-current liabilities
Deferred rent 27,890 24,234
Deferred tax liability 176,687 695,239
Capital leases payable - 39,584
------------ ------------
Total liabilities 5,400,119 6,932,564
Commitments and contingencies - -
Stockholders' equity:
Common stock 94,083 84,498
Additional paid-in capital 67,080,737 61,142,430
Accumulated other comprehensive loss (155,751) (428,107)
Accumulated deficit (58,406,968) (51,740,320)
------------ ------------
Total stockholders' equity 8,612,101 9,058,501
------------ ------------
Total liabilities and stockholders' equity $ 14,012,220 $ 15,991,065
============ ============
Procera Networks, Inc.
GAAP to Non-GAAP Reconciliation; and Supplemental Financial Information
Unaudited
Three Months Ended Six Months Ended
---------------------------------- ----------------------
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
---------- ---------- ---------- ---------- ----------
Sales - U.S.
GAAP as
reported 3,233,719 2,947,334 2,615,298 6,181,053 4,331,072
Reconciliation
of Gross
Profit:
U.S. GAAP as
reported 877,822 1,159,414 1,154,468 2,037,236 1,639,184
As a
percentage
of sales 27% 39% 44% 33% 38%
Adjustment:
Amortization
on
intangibles
(1) 381,500 381,500 381,500 763,000 763,000
Stock-based
compensation
(2) 16,395 18,059 6,845 34,454 13,241
---------- ---------- ---------- ---------- ----------
As Adjusted 1,275,717 1,558,973 1,542,813 2,834,690 2,415,425
As a
percentage
of sales 39% 53% 59% 46% 56%
Reconciliation
of Operating
Expense:
U.S. GAAP as
reported 3,726,832 3,650,448 5,341,606 7,377,280 9,553,162
Adjustment:
Amortization
on
intangibles
(1) 545,083 545,083 545,083 1,090,166 1,090,166
Stock-based
compensation
(2) 271,285 304,369 378,709 575,654 807,445
---------- ---------- ---------- ---------- ----------
As Adjusted 2,910,464 2,800,996 4,417,814 5,711,460 7,655,551
Reconciliation
of Net Loss:
U.S. GAAP as
reported (4,332,595) (2,334,053) (3,916,570) (6,666,648) (7,400,507)
Adjustment:
Amortization
on
intangibles
(1) 926,583 926,583 926,583 1,853,166 1,853,166
Stock-based
compensation
(2) 287,680 322,428 385,554 610,108 820,686
Interest
related
to
embedded
stock
option
(3) 1,644,756 - - 1,644,756 -
Income
tax
adjustment
(4) (259,904) (259,904) (259,904) (519,808) (519,808)
---------- ---------- ---------- ---------- ----------
As Adjusted (1,733,480) (1,344,946) (2,864,337) (3,078,426) (5,246,462)
========== ========== ========== ========== ==========
(1) The intangible assets recorded at fair value as a result of our
acquisitions are amortized over the estimated useful life of the respective
asset.
(2) Stock-based compensation expense is calculated in accordance with the
fair value recognition provisions of Statements of Financial Accounting
Standards No. 123 (R).
(3) Interest expense related to intrinsic value of embedded common stock
option feature of converted promissory notes.
(4) Income tax benefit from the amortization of intangible assets.
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Press Contact Jon Linden Procera Networks 1-408-890-7039
jon.linden@proceranetworks.com Investor Relations Contact Charles
Constanti Procera Networks 1-408-890-7066
cconstanti@proceranetworks.com
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