Neoware Reports Fiscal 2005 First Quarter Revenue and Earnings KING
OF PRUSSIA, Pa., Oct. 25 /PRNewswire-FirstCall/ -- Neoware Systems,
Inc. (NASDAQ:NWRE), the leading supplier of software, services and
appliances for thin client computing, today reported financial
results for its fiscal first quarter ended September 30, 2004.
Financial Highlights: -- Revenues increased to $16,303,000 from
$15,013,000 in the prior year first quarter, were the second
highest in the Company's history and were a record for a first
fiscal quarter. -- Gross profit was $7,090,000, or 43% of revenue,
near the upper end of the Company's guidance of 40% to 45%,
compared to $7,964,000, or 53% of revenue, in the prior year first
quarter, the result of higher enterprise sales and the introduction
of new products designed to build market share and expand the thin
client segment of the PC market. Gross margin was also 43% in the
prior sequential quarter. -- Operating expenses were $5,124,000,
compared to $5,143,000 in the prior year first quarter as the
Company maintained control of its expenditures. -- Net income was
$1,387,000, or $.09 per diluted share, compared to $1,863,000, or
$.12 per diluted share, in the year ago quarter. Customer
Highlights Selected customers in the quarter included Abercrombie
& Fitch; AutoZone; Cole National; Dane County, Wisconsin;
Kroger; NTL; O'Reilly Automotive; Pearle Vision Centers; Sempra
Energy; State of North Carolina and the U.S. Veterans
Administration. "We are pleased with the results we're reporting
for our fiscal first quarter," stated Michael Kantrowitz, Neoware's
Chairman and CEO. "Considering the seasonality in Europe that we
typically experience in the first quarter, we believe it is very
positive that we delivered the second highest revenue in our
Company's history. We continue to make progress with large
enterprise customers, and our alliance with IBM continues to
deliver positive results for Neoware. "Our new marketing
initiatives are delivering results. We are now more focused in our
marketing and selling efforts, and our new products - including the
industry's only $199 thin client from a major provider - are
opening new customer opportunities that we did not see before. For
example, this quarter we received an 8,000-unit order and delivered
4,000 of our new $199 thin client appliances to a major European
cable TV provider. Even more significant, these 8,000 units are
replacing personal computers, which demonstrates that our new
product and marketing strategies are producing their intended
results. "We are pleased to report that we completed the
acquisition of Visara's thin client product line during this
quarter. This acquisition provides us with new technology that we
can use to build additional sales with IBM enterprise customers.
Importantly, Neoware once again delivered a solidly profitable
quarter, demonstrating the strength of our software-focused
operating model. "Neoware's products are more secure, reliable,
affordable and manageable than personal computers, and they
eliminate the obsolescence built into traditional PCs. With
exciting new products, new marketing strategies, proprietary
technologies, and ample financial and human resources to accomplish
our goals, we are confident that we have the resources to grow our
business profitably in the coming year," Mr. Kantrowitz concluded.
UPCOMING INVESTOR EVENTS Neoware plans to participate in the
following investor events. Note that dates are subject to change -
please confirm via the Company's web site closer to the event date.
AEA Classic San Diego, CA November 9-10, 2004 Neoware Annual
Meeting King of Prussia, PA December 1, 2004 CONFERENCE CALL
INFORMATION In connection with this release, management of Neoware
will host a conference call at 5:00 PM Eastern Time on October 25,
2004. The conference call will be available live at
http://www.vcall.com/ and on the Neoware website at
http://www.neoware.com/. To participate, 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. A copy of this press release
announcing the Company's earnings and other financial and
statistical information about the periods to be presented in the
conference call will be available on the Company's website at
http://www.neoware.com/. The call will also be accessible by
dialing 800.894.5910 for domestic calls and +785.424.1052 for
international calls. The conference ID will be 509420. A replay of
the call will be available through November 2, 2004 by dialing
800.934.2730 domestically and +402.220.1141 internationally. About
Neoware Neoware's software, services, and thin client appliances
make computing more secure, manageable, reliable and affordable by
enabling global enterprises to fully leverage server-based
computing. By incorporating open, standards-based technologies and
eliminating the obsolescence that is built into standard PC
architectures, Neoware provides enterprises with increased
flexibility and choice, as well as lower up-front and total costs.
Neoware's software products enable enterprises to gain control of
their desktops, and to integrate mainframe, midrange, UNIX and
Linux applications with Windows(R) and the web. Neoware's thin
client appliances 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 PC. Neoware's products
are available worldwide from IBM, 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 .
Neoware is based in King of Prussia, PA. This press release
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including
statements regarding: our alliance with IBM and an increase in
sales to IBM's customers with the use of the Visara technology; our
new product and marketing initiatives; our proactive marketing and
sales efforts; our new products providing new customer
opportunities; our proprietary technologies and financial and human
resources; and the profitable growth of our business in the coming
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 ability to achieve our expectations for the coming
year; 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 dependence on our suppliers;
increased competition; our continued ability to sell our products
through IBM to its customers; our ability to attract and retain
qualified personnel; 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,
its reports on Form 10-K for the year ended June 30, 2004. Neoware,
ThinPC, and TeemTalk are trademarks of Neoware Systems, Inc. All
other names products and services are trademarks or registered
trademarks of their respective holders. NEOWARE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
(Unaudited) ASSETS September 30, June 30, 2004 2004 Current assets:
Cash and cash equivalents $12,473 $17,119 Short-term investments
38,709 38,177 Accounts receivable, net 10,814 10,580 Inventories
1,708 795 Prepaid expenses and other 1,522 1,628 Deferred income
taxes 643 643 Total current assets 65,869 68,942 Property and
equipment, net 464 509 Goodwill 21,202 17,466 Intangibles, net
3,267 3,545 Deferred income taxes 145 145 $90,947 $90,607
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable $4,050 $5,685 Accrued compensation and benefits 1,237 1,534
Other accrued expenses 1,475 1,071 Income taxes payable 1,293 854
Deferred revenue 656 739 Total current liabilities 8,711 9,883
Deferred revenue 266 235 Total liabilities 8,977 10,118
Stockholders' equity: Preferred stock - - Common stock 16 16
Additional paid-in capital 71,807 71,718 Treasury stock, 100,000
shares at cost (100) (100) Accumulated other comprehensive income
941 936 Retained earnings 9,306 7,919 Total stockholders' equity
81,970 80,489 $90,947 $90,607 NEOWARE SYSTEMS, INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (in thousands, except per share data)
(Unaudited) Three Months Ended September 30, 2004 2003 Net revenues
$16,303 $15,013 Cost of revenues 9,213 7,049 Gross profit 7,090
7,964 Sales and marketing 3,102 2,965 Research and development 664
721 General and administrative 1,358 1,457 Operating expenses 5,124
5,143 Operating income 1,966 2,821 Foreign exchange loss (23) -
Interest income, net 159 83 Income before income taxes 2,102 2,904
Income taxes 715 1,041 Net income $1,387 $1,863 Earnings per share:
Basic $0.09 $0.12 Diluted $0.09 $0.12 Weighted average number of
common shares outstanding: Basic 15,799 15,445 Diluted 16,106
16,200 NEOWARE SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data) (Unaudited) Three Months
Ended September 30, 2004 2003 Cash flows from operating activities:
Net income $1,387 $1,863 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation 64 72
Amortization of intangibles 271 187 Stock option benefit on
deferred income taxes 20 - Changes in operating assets and
liabilities, net of effect from acquisition: Accounts receivable
(233) 1,397 Inventories (913) (790) Prepaid expenses and other 107
46 Accounts payable (1,636) (2,263) Accrued compensation and
benefits (297) (292) Other accrued expenses 407 216 Income taxes
payable 439 735 Deferred revenue (52) 139 Net cash (used in)
provided by operating activities (436) 1,310 Cash flows from
investing activities: Purchase of the Visara product line (3,774) -
Purchase of the TeemTalk software business - (9,963) Purchases of
short-term investments (17,900) (16,209) Sales of short-term
investments 17,368 982 Purchase of intangible assets - (125)
Purchases of property and equipment (19) (80) Net cash used in
investing activities (4,325) (25,395) Cash flows from financing
activities: Repayments of capital leases (3) (2) Proceeds from
issuance of common stock, net of expenses - 24,609 Exercise of
stock options and warrants 69 737 Net cash provided by financing
activities 66 25,344 Effect of foreign exchange rate changes on
cash 49 13 Increase (decrease) in cash and cash equivalents (4,646)
1,272 Cash and cash equivalents, beginning of period 17,119 26,014
Cash and cash equivalents, end of period $12,473 $27,286
Supplemental disclosures: Cash paid for income taxes $31 $264 Cash
paid for interest 2 4 DATASOURCE: Neoware Systems, Inc. CONTACT:
Investor Relations: Cameron Associates: Kevin McGrath,
+1-212-245-8000 x 203, , for Neoware Systems; or Neoware Systems,
Inc.: Keith Schneck, CFO, +1-610-277-8300, Web site:
http://www.neoware.com/
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