Procera Networks Inc. (NYSE Amex: PKT), a developer of Evolved Deep
Packet Inspection (DPI) solutions providing traffic awareness,
control and protection for complex networks, today reported
financial results for its third quarter ended September 30, 2009.
Q3'09 Key Highlights:
-- Record revenue of $4.6 million; increased 70% year-over-year and 42%
sequentially
-- Sixth consecutive quarter of year-over-year revenue growth
-- Announced Tier 1 service provider follow-on order of $4.5 million
-- Continued focus on Tier 1 service providers contributes to strong
bookings of $6.3 million
-- Reduced operating expenses 30% year-over-year
"During the third quarter we achieved record revenue and strong
bookings," said James Brear, president and CEO of Procera. "We also
secured a $4.5 million Tier-1 follow-on order for our PacketLogic
systems, which validates our technology leadership and establishes
Procera's credibility as a viable Tier 1 supplier."
Total revenue for the third quarter of 2009 was $4.6 million, an
increase of 70% from $2.7 million in the third quarter of 2008. The
GAAP net loss for the third quarter of 2009 was $1.6 million, or a
net loss of $0.02 per diluted share. This compares to a GAAP net
loss of $3.8 million, or a net loss of $0.05 per diluted share, in
the third quarter of 2008.
Non-GAAP net loss for the third quarter of 2009 was $870,000, as
compared to non-GAAP net loss of $2.6 million in the third quarter
of 2008. For an explanation of Non-GAAP financial measures used in
this release, and a reconciliation to comparable GAAP measures,
please refer to Use of Non-GAAP Financial Information below.
Conference Call Information
Procera Networks will host a conference call at 4:30 p.m.
eastern time today to discuss its financial results for the third
quarter ended September 30, 2009. Interested parties can access the
live call by dialing 877-718-5099 or 719-325-4823 and entering
passcode 4157040. An archive of the conference call will be
available on the Quarterly Results and Events section of the
Procera Networks' Investor Relations Web site at
www.proceranetworks.com/investors, on or before November 6,
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 follow-on 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 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
Procera's management believes that these non-GAAP financial
measures, when taken together with the corresponding consolidated
GAAP measures and related segment information, provide incremental
insight into the underlying factors and trends affecting both the
Company's performance and its cash generating potential. Management
believes these non-GAAP measures increase the transparency of the
Company's current results and enable investors to more fully
understand trends in its current and future performance.
Thus, in addition to the 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." Management
regularly uses these 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 that requires cash. Investors
should note that our intangible assets were essential for
generating revenues 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 and
consultants, 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 debt
discounts related to convertible promissory notes that were issued
and converted within the second quarter of 2009.
These non-GAAP financial measures are not consistent with GAAP
because they do not fully reflect non-cash expenses. The
above-mentioned non-GAAP measures are generated by adjusting the
related GAAP measures solely to reverse the effect of the above
mentioned non-cash expenses. The Company uses these financial
measures to provide additional insight into current operating and
business trends not readily apparent from the GAAP results.
Management believes users of Procera's financial statements will
benefit from greater transparency in referring to these non-GAAP
financial measures when assessing the Company's operating results,
as well as when forecasting and analyzing future periods. However,
management recognizes that:
-- these non-GAAP financial measures are limited in their usefulness and
should be considered only as a supplement to the Company's GAAP financial
measures;
-- these non-GAAP financial measures should be read in conjunction with
our consolidated financial statements prepared in accordance with GAAP
-- these non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, the Company's GAAP financial
measures;
-- these non-GAAP financial measures should not be considered to be
superior to the Company's GAAP financial measures;
-- these non-GAAP financial measures were not prepared in accordance with
GAAP and investors should not assume that the non-GAAP financial measures
presented in this earnings release were prepared under a comprehensive set
of rules or principles; and
-- management intends to continue to track and present these non-GAAP
financial measures for future periods.
Further, these non-GAAP financial measures may be unique to
Procera, as they may be different from non-GAAP financial measures
used by other companies. As such, this presentation of non-GAAP
financial measures may not enhance the comparability of the
Company's results to the results of other companies.
A reconciliation of each non-GAAP financial measure to the most
directly comparable GAAP financial measure or measures appears at
the end of this press release.
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 600 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 in Europe and Australia.. More
information is available at www.proceranetworks.com.
Procera Networks, Inc.
Condensed Consolidated Statements of Operations
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
2009 2008 2009 2008
------------ ------------ ------------ -------------
Sales
Product sales $ 3,787,205 $ 2,209,605 $ 8,509,093 $ 5,748,372
Support sales 796,279 479,568 2,255,444 1,271,874
------------ ------------ ------------ -------------
Total sales 4,583,484 2,689,173 10,764,537 7,020,246
Cost of sales
Product cost of
sales 2,969,853 1,788,622 6,909,181 4,209,445
Support cost of
sales 125,699 125,654 330,188 423,797
------------ ------------ ------------ -------------
Total cost of
sales 3,095,552 1,914,276 7,239,369 4,633,242
------------ ------------ ------------ -------------
Gross profit 1,487,932 774,897 3,525,168 2,387,004
------------ ------------ ------------ -------------
32% 29% 33% 34%
Operating
expenses:
Research and
development 583,738 809,201 1,903,187 2,497,734
Sales and
marketing 1,622,291 2,094,101 4,961,082 6,435,501
General and
administrative 1,088,302 1,896,837 3,807,342 5,392,988
------------ ------------ ------------ -------------
Total
operating
expenses 3,294,331 4,800,139 10,671,611 14,326,223
------------ ------------ ------------ -------------
Loss from
operations (1,806,399) (4,025,242) (7,146,443) (11,939,219)
------------ ------------ ------------ -------------
Other income
(expense)
Interest and
other income 11,234 27,371 36,503 53,254
Interest and
other expense (75,752) (14,569) (1,843,205) (49,373)
------------ ------------ ------------ -------------
Total other
income
(expense) (64,518) 12,802 (1,806,702) 3,881
Loss before
income taxes (1,870,917) (4,012,440) (8,953,145) (11,935,338)
Income tax benefit 275,870 259,904 691,450 782,295
------------ ------------ ------------ -------------
Net loss $ (1,595,047) $ (3,752,536) $ (8,261,695) $ (11,153,043)
============ ============ ============ =============
Net loss per share
- basic and
diluted $ (0.02) $ (0.05) $ (0.09) $ (0.14)
============ ============ ============ =============
Shares used in
computing net
loss per
share-basic and
diluted 94,082,724 79,018,207 88,516,837 77,424,517
Procera Networks, Inc.
Condensed Consolidated Balance Sheets
September 30, December 31,
2009 2008
------------- ------------
ASSETS Unaudited
Current Assets:
Cash and cash equivalents $ 2,389,449 $ 1,721,225
Accounts receivable, net of allowance 5,677,625 5,454,745
Inventories, net 2,104,103 3,445,802
Prepaid expenses and other 546,521 824,340
------------- ------------
Total current assets 10,717,698 11,446,112
Property and equipment, net 732,419 2,573,045
Purchased intangible assets, net - 964,405
Goodwill 960,209 960,209
Other non-current assets 47,223 47,294
------------- ------------
Total assets $ 12,457,549 $ 15,991,065
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,302,241 $ 2,457,430
Deferred revenue 1,923,597 1,313,092
Accrued liabilities 1,525,608 1,841,442
Notes payable 500,000 550,000
Capital leases payable - 11,543
------------- ------------
Total current liabilities 5,251,447 6,173,507
Non-current liabilities
Deferred rent 38,540 24,234
Deferred tax liability - 695,239
Capital leases payable - 39,584
------------- ------------
Total liabilities 5,289,987 6,932,564
Commitments and contingencies - -
Stockholders' equity:
Common stock 94,083 84,498
Additional paid-in capital 67,356,581 61,142,430
Accumulated other comprehensive loss (281,086) (428,107)
Accumulated deficit (60,002,016) (51,740,320)
------------- ------------
Total stockholders' equity 7,167,562 9,058,501
------------- ------------
Total liabilities and stockholders' equity $ 12,457,549 $ 15,991,065
============= ============
Procera Networks, Inc.
GAAP to Non-GAAP Reconciliation; and Supplemental Financial Information
Unaudited
Three Months Ended Nine Months Ended
------------------------------------- -------------------------
September September September September
30, June 30, 30, 30, 30,
2009 2009 2008 2009 2008
----------- ----------- ----------- ----------- ------------
Sales -
U.S. GAAP
as
reported 4,583,484 3,233,720 2,689,173 10,764,537 7,020,246
Reconciliation
of Gross
Profit:
U.S. GAAP
as
reported 1,487,932 877,822 774,897 3,525,168 2,387,004
As a
percentage
of
sales 32% 27% 29% 33% 34%
Adjustment:
Amortization
on
intangibles
(1) 254,333 381,500 381,500 1,017,333 1,144,500
Stock-based
compensation
(2) 15,943 16,395 18,193 50,397 31,434
----------- ----------- ----------- ----------- ------------
As
Adjusted 1,758,208 1,275,717 1,174,590 4,592,898 3,562,938
As a
percentage
of
sales 38% 39% 44% 43% 51%
Reconciliation
of
Operating
Expense:
U.S. GAAP
as
reported 3,294,331 3,726,832 4,800,139 10,671,611 14,326,223
Adjustment:
Amortization
on
intangibles
(1) 371,074 545,083 545,083 1,461,240 1,635,249
Stock-based
compensation
(2) 259,901 271,285 447,317 835,555 1,254,763
----------- ----------- ----------- ----------- ------------
As
Adjusted 2,663,356 2,910,464 3,807,739 8,374,816 11,436,211
Reconciliation
of
Net Loss:
U.S. GAAP
as
reported (1,595,047) (4,332,595) (3,752,536) (8,261,695) (11,153,043)
Adjustment:
Amortization
on
intangibles
(1) 625,407 926,583 926,583 2,478,573 2,779,749
Stock-based
compensation
(2) 275,844 287,680 465,510 885,952 1,286,197
Interest
related
to
beneficial
conversion
feature
(3) - 1,644,756 - 1,644,756 -
Income
tax
adjustment
(4) (176,687) (259,904) (259,904) (696,495) (779,712)
----------- ----------- ----------- ----------- ------------
As
Adjusted (870,483) (1,733,480) (2,620,346) (3,948,909) (7,866,809)
=========== =========== =========== =========== ============
(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 beneficial conversion feature of
convertible promissory notes.
(4) Income tax benefit from the amortization of intangible assets.
Press Contact Jon Linden Procera Networks 1-408-890-7039
jon.linden@proceranetworks.com Investor Relations Contact Cynthia
Hiponia The Blueshirt Group 1-415-217-4966
ir@proceranetworks.com
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