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 first quarter ended March 31, 2010.
Q1'10 Key Highlights:
-- Revenue of $3.3 million, up 12% year-over-year
-- Eighth consecutive quarter of year-over-year revenue growth
-- Gross margin improved sequentially to 52%
-- Generated $3 million in cash from operations
-- Ended the quarter with $10 million of cash and no debt
-- Added two Tier-1 Service Providers as new customers
-- Launched PacketLogic PL8270 DPI solution
"During the quarter, we were awarded initial orders from two
Tier-1 Service Providers that have the potential to become
significant customers for the Company, and we now have 11 active
Tier-1 trials with potential customers and a strong pipeline of
upcoming trials," said James Brear, president and CEO of Procera
Networks, Inc. "We remain focused on expanding opportunities for
follow-on orders with our new, as well as existing customers, and
obtaining initial orders from our active Tier-1 trials.
"Our DPI solution continues to deliver the highest performance
in the market, which is translating into continued new customer
wins and further market penetration. Last month, we launched our
PacketLogic PL8720 solution specifically designed for customers
with accelerating network growth plans who are looking for a more
economical 10GB port DPI solution. This new product is designed to
satisfy a significant demand from many mid-tier carriers and higher
education institutions. We are reiterating our calendar year 2010
guidance for total revenue growth of approximately 40 percent
year-over-year, or $28 million."
Total revenue for the first quarter of 2010 was $3.3 million, a
12% increase from $2.9 million in the first quarter of 2009. The
GAAP net loss for the first quarter of 2010 was $1.5 million, or a
net loss of $0.02 per share, compared to a GAAP net loss of $2.3
million, or a net loss of $0.03 per share, in the first quarter of
2009.
The Non-GAAP net loss for the first quarter of 2010 was 1.2
million, compared to non-GAAP net loss of $1.3 million in the first
quarter of 2009. 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, Inc. will host a conference call at 4:30 p.m.
ET today to discuss its financial results for the first quarter
ended March 31, 2010. Interested parties can access the live call
by dialing 877-941-1427 or 480-629-9664 and request the "Procera"
call. 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.
Forward Looking Statements
Safe Harbor Statement: this press release contains
forward-looking statements, including statements relating to
estimated growth and total revenue for 2010, the potential for new
Tier 1 customers to become significant customers, obtaining
follow-on orders from new and existing customers, the prospects for
the newly launched PacketLogic PL8720 product, and the expected
demand for Procera Networks' products and services. 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 Form 10-K filed for the year ended December
31, 2009 and subsequent quarterly report on Form 10-Q. 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 certain 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
Procera'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 financial
performance. 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.
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™ (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
March 31,
-----------------------------
2010 2009
------------- -------------
Sales
Product sales $ 2,382,964 $ 2,171,043
Support sales 910,646 776,291
------------- -------------
Total sales 3,293,610 2,947,334
Cost of sales
Product cost of sales 1,451,935 1,668,748
Support cost of sales 127,485 119,172
------------- -------------
Total cost of sales 1,579,420 1,787,920
------------- -------------
Gross profit 1,714,190 1,159,414
------------- -------------
52.0% 39.3%
Operating expenses:
Research and development 620,495 636,142
Sales and marketing 1,457,497 1,684,861
General and administrative 1,107,374 1,329,445
------------- -------------
Total operating expenses 3,185,366 3,650,448
------------- -------------
Loss from operations (1,471,176) (2,491,034)
------------- -------------
Interest and other income (expense), net (42,972) (23,836)
------------- -------------
Loss before income taxes (1,514,148) (2,514,870)
Income tax provision (benefit) 1,256 (180,817)
------------- -------------
Net loss $ (1,515,404) $ (2,334,053)
============= =============
Net loss per share - basic and diluted $ (0.02) $ (0.03)
============= =============
Shares used in computing net loss per share
- basic and diluted 99,482,724 84,498,491
Procera Networks, Inc.
Condensed Consolidated Balance Sheets
March 31, December 31,
2010 2009
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 10,146,327 $ 3,191,896
Accounts receivable, net of allowance 3,485,986 8,908,620
Inventories, net 2,110,479 1,877,264
Prepaid expenses and other 822,762 692,007
------------- -------------
Total current assets 16,565,554 14,669,787
Property and equipment, net 588,311 589,717
Goodwill 960,209 960,209
Other non-current assets 80,944 103,307
------------- -------------
Total assets $ 18,195,018 $ 16,323,020
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ - $ 1,917,088
Accounts payable 693,468 1,003,225
Deferred revenue 1,990,267 2,103,060
Accrued liabilities 1,717,145 2,255,039
Notes payable - 500,000
------------- -------------
Total current liabilities 4,400,880 7,778,412
Non-current liabilities
Deferred rent 11,748 29,371
------------- -------------
Total liabilities 4,412,628 7,807,783
Commitments and contingencies - -
Stockholders' equity:
Common stock 112,083 94,083
Additional paid-in capital 74,572,008 67,814,203
Accumulated other comprehensive loss (261,697) (268,449)
Accumulated deficit (60,640,004) (59,124,600)
------------- -------------
Total stockholders' equity 13,782,390 8,515,237
------------- -------------
Total liabilities and stockholders' equity $ 18,195,018 $ 16,323,020
============= =============
Procera Networks, Inc.
GAAP to Non-GAAP Reconciliation; and Supplemental Financial Information
Unaudited
Three Months Ended
----------------------------------------
March 31, December 31, March 31,
2010 2009 2009
------------ ------------ ------------
Sales - U.S. GAAP as reported 3,293,610 9,364,307 2,947,334
Reconciliation of Gross Profit:
U.S. GAAP as reported 1,714,190 4,658,825 1,159,414
As a percentage of sales 52% 50% 39%
Adjustment:
Amortization on intangibles
(1) - - 381,500
Stock-based compensation
(2) 21,727 20,362 18,059
------------ ------------ ------------
As Adjusted 1,735,917 4,679,187 1,558,973
As a percentage of sales 53% 50% 53%
Reconciliation of Operating
Expense:
U.S. GAAP as reported 3,185,366 3,749,321 3,650,448
Adjustment:
Amortization on intangibles
(1) - - 545,083
Stock-based compensation
(2) 282,875 250,643 304,369
------------ ------------ ------------
As Adjusted 2,902,491 3,498,678 2,800,996
Reconciliation of Net Income
(Loss):
U.S. GAAP as reported (1,515,404) 877,416 (2,334,053)
Adjustment:
Amortization on intangibles
(1) - - 926,583
Stock-based compensation
(2) 304,602 271,005 322,428
Income tax adjustment (3) - - (259,904)
------------ ------------ ------------
As Adjusted (1,210,802) 1,148,421 (1,344,946)
============ ============ ============
(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) Income tax benefit from the amortization of intangible assets.
Press Contact Jon Linden Procera Networks, Inc. 1-408-890-7039
jon.linden@proceranetworks.com Investor Relations Contact Charles
Messman or Todd Kehrli MKR Group Inc. 323-468-2300
pkt@mkr-group.com
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