KING OF PRUSSIA, Pa., April 27 /PRNewswire-FirstCall/ -- Neoware,
Inc. (NASDAQ:NWRE), the leading supplier of software-powered thin
client solutions for enterprises that make computing more secure,
reliable, affordable and manageable, today reported financial
results for its fiscal third quarter ended March 31, 2006. "We are
experiencing healthy demand from enterprise customers for our thin
client solutions and we are translating this demand into positive
financial results," commented Michael Kantrowitz, Neoware's
Chairman and CEO. Q3 Financial Highlights: -- Revenues increased
46% to $27,787,000 from $19,001,000 in the prior year third
quarter. -- Gross profit was 44% of revenue, compared to 43% of
revenue in the prior year third quarter. Non-GAAP gross profit was
45% of revenue, compared to 44% of revenue in the prior year third
quarter. -- Operating expenses were $8,977,000, or 32% of revenue,
compared to $5,809,000, or 31% of revenue, in the prior year third
quarter. Non-GAAP operating expenses were $7,631,000, or 28% of
revenue, compared to $5,515,000, or 29% of revenue, in the prior
year third quarter. -- Non-GAAP net income for the quarter
increased 71% to $.19 per fully diluted share, compared to $.13 per
fully diluted share, in the prior year third quarter. -- Net income
for the quarter was $.12 per diluted share, compared to $.11 per
diluted share in the prior year third quarter. -- The Company
generated approximately $6.1 million in cash from operations, and
ended the quarter with $111 million of cash, the result of positive
cash flow and the Company's underwritten public stock offering in
February 2006. -- Non-GAAP results exclude amortization of
acquisition-related intangibles and stock-based compensation and
apply pro forma tax rates of 33% and 34% in the third quarter of
fiscal 2006 and 2005, respectively, for the purpose of showing a
comparable view of the Company's performance from period to period.
-- The Company's fully diluted share count increased to 18.8
million shares from 16.4 million shares in the year ago quarter as
a result of the Company's public offering of its common stock in
February 2006, and is expected to be approximately 20.6 million
shares in coming periods. "This quarter we were able to grow our
revenues significantly with less customer concentration than in
recent quarters," commented Mr. Kantrowitz. "In this quarter our
largest individual end customer generated approximately $2 million
of revenue while in the prior two quarters our largest end
customers each generated nearly $6 million per quarter. While we
expect large orders from individual customers to result in
concentrations in future quarters, we are encouraged by the
broadening of our end customer base and believe this is a very
positive sign that shows increasing breadth of demand for our
products." "Neoware thin clients and software enable enterprises to
address some of the most important challenges they face today. Our
products enable organizations to significantly improve the security
and manageability of devices on the edge of their networks - their
most vulnerable entry points - while substantially reducing the
cost of computing compared to traditional PC computing," Mr.
Kantrowitz continued. "As a result, our customers can access
centralized PC and host applications, and do so from more
manageable devices with central control, significantly enhanced
security, and much lower costs." "Neoware has global reach with
sales and integration centers in the U.S., Australia, Austria,
China, France, Germany, India, and the United Kingdom. Combining
these integration centers with our software focus and ownership of
key software technologies gives us the ability to integrate our
thin client devices and software into our customers' IT
infrastructure. Our alliances with IBM and Lenovo continue to
deliver positive results and provide us with access to large
enterprise customers around the globe." "We now have $111 million
of cash and short-term investments, the result of positive cash
flow and the underwritten offering we completed in February. As a
result, we believe we are better positioned than ever to execute
our strategy to grow our market, and to build upon our leadership
position within it," Mr. Kantrowitz concluded. CONFERENCE CALL
INFORMATION Neoware will host a conference call at 5:00 PM on April
27, 2006. The conference call will be available live at
http://www.vcall.com/ and on the Neoware website at
http://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 through May 30, 2006. The call will
also be accessible by dialing 1-800-974-9436 from 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 May 30,
2006 by dialing 1-800-645-7959 in the US and +1-973-854-2594
internationally. 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 http://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
http://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% for the third quarter of fiscal 2006 and 2005, respectively.
This compares to GAAP effective tax rates of 36% and 34% for the
2006 and 2005 third quarter periods, respectively. About Neoware
Neoware, Inc. (NASDAQ:NWRE), provides software-powered thin client
solutions for enterprises throughout the world. Neoware's software
powers and manages thin client devices and traditional personal
computers, enabling them to run Windows(R) and web applications
across a network, stream operating systems on demand, and connect
to mainframes, mid-range, UNIX and Linux systems. Headquartered in
King of Prussia, PA, USA, Neoware has offices in Australia,
Austria, China, France, Germany and the United Kingdom. Neoware's
products are available worldwide from select, knowledgeable
resellers, as well as via its partnerships with IBM, Lenovo, and
ClearCube. Neoware can be reached by email at . 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: demand for our
solutions from our enterprise customers; the expectation that we
will have approximately 20.6 million fully diluted shares in coming
periods; the increasing demand for our products from a less
concentrated group of customers; customers demonstrating an
increase in the breadth of demand for our products; our alliances
with IBM and Lenovo contributing to our positive results and
providing us with access to large enterprise customers; and our
ability to grow our market and our leadership position. 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; 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, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)
March 31, June 30, ASSETS 2006 2005 Current assets: Cash and cash
equivalents $82,428 $8,285 Short-term investments 28,813 34,874
Accounts receivable, net 22,233 17,165 Inventories 6,125 3,051
Prepaid expenses and other 2,332 2,627 Deferred income taxes 1,015
1,015 Total current assets 142,946 67,017 Goodwill 43,642 31,223
Intangibles, net 12,954 9,386 Other 546 -- Property and equipment,
net 1,630 416 $201,718 $108,042 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $12,538 $8,408 Accrued
compensation and benefits 2,830 2,018 Restructuring reserve 1,012
-- Income taxes payable -- 2,290 Other accrued expenses 3,748 3,166
Deferred revenue 983 734 Total current liabilities 21,111 16,616
Deferred income taxes 2,841 1,151 Deferred revenue 285 306 Total
liabilities 24,237 18,073 Stockholders' equity: Preferred stock --
-- Common stock 20 16 Additional paid-in capital 155,856 74,577
Treasury stock, 100,000 shares at cost (100) (100) Accumulated
other comprehensive income (loss) (349) 118 Retained earnings
22,054 15,358 Total stockholders' equity 177,481 89,969 $201,718
$108,042 NEOWARE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except per share data) (unaudited) Three Months Ended
Nine Months Ended March 31, March 31, 2006 2005 2006 2005 Net
revenues $27,787 $19,001 $83,666 $55,775 Cost of revenues Cost of
products (a) 15,353 10,571 47,051 31,286 Amortization of
intangibles 338 177 913 400 Total cost of revenues 15,691 10,748
47,964 31,686 Gross profit 12,096 8,253 35,702 24,089 Operating
expenses Sales and marketing 4,295 2,806 12,864 8,664 Research and
development 1,645 866 4,446 2,299 General and administrative 2,451
1,843 7,614 4,848 Amortization of intangibles 586 294 1,377 717
Total operating expenses (b) 8,977 5,809 26,301 16,528 Operating
income 3,119 2,444 9,401 7,561 Foreign exchange gain (loss) (12)
(7) 64 (243) Interest income, net 507 241 998 594 Income before
income taxes 3,614 2,678 10,463 7,912 Income taxes 1,301 913 3,767
2,692 Net income $2,313 $1,765 $6,696 $5,220 Earnings per share:
Basic $0.13 $0.11 $0.40 $0.33 Diluted $0.12 $0.11 $0.38 $0.32
Weighted average number of common shares outstanding: Basic 18,023
16,061 16,931 15,836 Diluted 18,848 16,404 17,474 16,207 (a)
includes stock-based compensation expense of $20 and $60 for the
three and nine months ended March 31, 2006. (b) includes
stock-based compensation expense of $760 and $2,239 for the three
and nine months ended March 31, 2006. NEOWARE, INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months
Ended Nine Months Ended March 31, March 31, 2006 2005 2006 2005
Cash flows from operating activities: Net income $2,313 $1,765
$6,696 $5,220 Adjustments to reconcile net income to net cash
provided by operating activities- Amortization of intangibles 924
470 2,290 1,117 Depreciation 134 69 302 199 Non-cash share-based
compensation 780 - 2,298 - Income tax benefit on stock option
exercises - 264 - 385 Changes in operating assets and liabilities -
net of effect from acquisition- Accounts receivable 1,220 (271)
(4,239) (3,013) Inventories (579) 1,529 465 (1,523) Prepaid
expenses and other (987) (201) 379 590 Accounts payable 2,883 880
3,104 (479) Accrued expenses (306) 778 (3,931) 2,662 Deferred
revenue (313) 7 108 292 Net cash provided by operating activities
6,069 5,290 7,472 5,450 Cash flows from investing activities:
Acquisition of Maxspeed, net of cash acquired (259) - (12,053) -
Purchase of TeleVideo thin client business - - (3,520) - Purchase
of Visara thin client business - (6) (2,107) (3,805) Purchase of
ThinTune thin client business, net of cash acquired - (10,119) -
(10,119) Purchase of Mangrove Systems, SAS, net of cash acquired -
(2,829) - (2,829) Purchase of short-term investments (12,850) -
(26,288) (20,233) Sales of short-term investments 7,864 10,055
33,226 52,239 Purchases of property and equipment (594) (24)
(1,412) (90) Net cash provided by (used in) investing activities
(5,839) (2,923) (12,154) 15,163 Cash flows from financing
activities: Proceeds from issuance of common stock, net of expenses
71,236 - 71,236 - Exercise of stock options 638 433 6,014 1,168 Tax
benefit from share-based payment arrangements 296 - 1,733 - Net
cash provided by financing activities 72,170 433 78,983 1,168
Effect of foreign exchange rate changes on cash (65) 1 (158) 187
Increase in cash and cash equivalents 72,335 2,801 74,143 21,968
Cash and cash equivalents, beginning of period 10,093 36,286 8,285
17,119 Cash and cash equivalents, end of period $82,428 $39,087
$82,428 $39,087 Supplemental disclosures: Cash paid for income
taxes $974 $14 $4,841 $60 Issuance of common stock for purchase of
Mangrove Systems, SAS - - - 1,300 NEOWARE, INC. RECONCILIATION OF
GAAP TO NON-GAAP AMOUNTS (in thousands, except per share data)
(unaudited) Three Months Ended Three Months Ended March 31, 2006
March 31, 2005 GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Net revenues $27,787 - $27,787 $19,001 - $19,001 Cost of revenues
Cost of products 15,353 (20)A 15,333 10,571 - 10,571 Amortization
of intangibles 338 (338)B - 177 (177)B - Total cost of revenue
15,691 (358) 15,333 10,748 (177) 10,571 Gross profit 12,096 358
12,454 8,253 177 8,430 Gross profit percentage 43.5% 44.8% 43.4%
44.4% Operating expenses Sales and marketing 4,295 (282)A 4,013
2,806 - 2,806 Research and development 1,645 (99)A 1,546 866 - 866
General and administrative 2,451 (379)A 2,072 1,843 - 1,843
Amortization of intangibles 586 (586)B - 294 (294)B - Operating
expenses 8,977 (1,346) 7,631 5,809 (294) 5,515 Operating income
3,119 1,704 4,823 2,444 471 2,915 Percentage of revenue 11% 17% 13%
15% Foreign exchange gain (loss) (12) - (12) (7) - (7) Interest
income, net 507 - 507 241 - 241 Income before income taxes 3,614
1,704 5,318 2,678 471 3,149 Income taxes 1,301 454C 1,755 913 158C
1,071 Net income $2,313 $1,250 $3,563 $1,765 $313 $2,078 Earnings
per share - diluted $0.12 $0.07 $0.19 $0.11 $0.02 $0.13 Weighted
average shares outstanding - diluted 18,848 18,848 18,848 16,404
16,404 16,404 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 and to adjust to an effective tax rate of 33%
and 34% for the three months ended March 31, 2006 and March 31,
2005, respectively. NEOWARE, INC. RECONCILIATION OF GAAP TO
NON-GAAP AMOUNTS (in thousands, except per share data) (unaudited)
Nine Months Ended Nine Months Ended March 31, 2006 March 31, 2005
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP Net revenues
$83,666 - $83,666 $55,775 - $55,775 Cost of revenues Cost of
products 47,051 (60)A 46,991 31,286 - 31,286 Amortization of
intangibles 913 (913)B - 400 (400)B - Total cost of revenue 47,964
(973) 46,991 31,686 (400) 31,286 Gross profit 35,702 973 36,675
24,089 400 24,489 Gross profit percentage 42.7% 43.8% 43.2% 43.9%
Operating expenses Sales and marketing 12,864 (829)A 12,035 8,664 -
8,664 Research and development 4,446 (306)A 4,140 2,299 - 2,299
General and administrative 7,614 (1,104)A 6,510 4,848 - 4,848
Amortization of intangibles 1,377 (1,377)B - 717 (717)B - Operating
expenses 26,301 (3,616) 22,865 16,528 (717) 15,811 Operating income
9,401 4,589 13,990 7,561 1,117 8,678 Percentage of revenue 11% 16%
14% 16% Foreign exchange gain (loss) 64 - 64 (243) - (243) Interest
income, net 998 - 998 594 - 594 Income before income taxes 10,463
4,589 15,052 7,912 1,117 9,029 Income taxes 3,767 1,200C 4,967
2,692 378C 3,070 Net income $6,696 $3,389 $10,085 $5,220 $739
$5,959 Earnings per share - diluted $0.38 $0.20 $0.58 $0.32 $0.05
$0.37 Weighted average shares outstanding - diluted 17,474 17,474
17,474 16,207 16,207 16,207 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 and to adjust to an effective
tax rate of 33% and 34% for the nine months ended March 31, 2006
and March 31, 2005, respectively. DATASOURCE: Neoware, Inc.
CONTACT: Neoware, Inc.: Keith Schneck, CFO, +1-610-277-8300, or Web
site: http://www.neoware.com/
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