PROCERA NETWORKS INC FREMONT, Calif., Nov. 3, 2014 /PRNewswire/ -- Procera Networks, Inc. (NASDAQ: PKT), the global Subscriber Experience company, today reported financial results for its third quarter ended on September 30, 2014.
Third Quarter 2014 Financial & Business Highlights
-- Reports revenue of $16.1 million
-- The ratio of bookings to revenue was above one
-- Added three new service provider customers
-- Received over $5 million in first-time orders from a Tier 1 European MSO
for our Service Plan Assurance solution offering
-- Established as a leader in the NFV (Network Function Virtualization)
performance arena by the European Advanced Network Test Center at
40Gbps/s on COTS Equipment
Revenue for the third quarter of 2014 was $16.1 million, compared with $21.3 million in the third quarter of 2013.
GAAP net loss for the third quarter of 2014 was $15.7 million, or $0.77 per diluted share, which includes a $12.4 million impairment charge to write-down the goodwill and purchased intangible assets related to an acquisition, and compared with a GAAP net loss of $3.0 million, or $0.15 per diluted share, for the third quarter of 2013. Non-GAAP net loss for the third quarter of 2014 was $1.5 million, or $0.08 per diluted share, compared with a non-GAAP net loss of $0.2 million, or $0.01 per diluted share, for the third quarter of 2013. The ratio of bookings to revenue was above one for the third quarter of 2014.
A description of the non-GAAP financial measures and reconciliation to comparable GAAP measures is provided in the accompanying table entitled "Use of Non-GAAP Financial Information" below.
"Our results for the quarter reflect our previously announced expectations, and although they are below our initial plans, we believe we have laid a solid technology and customer foundation to improve the financial fundamentals and drive shareholder value," said James Brear, president and chief executive officer of Procera Networks. "With the recent customer wins and successes in R&D, we are achieving our strategic goals in the areas of analytics and virtualization, and are focused on returning Procera to a long term growth trajectory."
Guidance
Revenue for the fiscal year ending December 31, 2014 is expected to be in the range of $70 million to $75 million.
This guidance is an estimate only and actual performance could differ. Procera's financial results historically have been volatile, and a number of uncertainties and other factors may cause Procera's future results, performance or achievements to be materially different from prior results.
Conference Call Information
Procera Networks, Inc. is hosting a conference call for analysts and investors to discuss its third quarter 2014 results at 1:30 p.m. Pacific time (4:30 p.m. Eastern time) today, November 3, 2014. A live audio webcast of the conference call along with supplemental financial information will also be accessible from the "Investor Relations" section of Procera's website at http://proceranetworks.com/investors. A replay will be available following the call on Procera's Investor Relations website and for one week at the following numbers: 1-877-870-5176 (domestic), 1-858-384-5517 (international) using ID# 13592573.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements related to Procera Networks, Inc., including statements about Procera's expectations for 2014 revenue, long-term growth and the market opportunity, the estimated future value of Procera's recently awarded business, potential applications for Procera's products, as well as Procera's general outlook. Statements in this release that are not historical or current facts are forward-looking statements. All forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause Procera's actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, without limitation, risks and uncertainties related to the acceptance and adoption of Procera's products; Procera's ability to service and upgrade its products; lengthy sales cycles and lab and field trial delays by service providers; its ability to obtain any follow-on orders from major customers; its customers canceling orders or awards; its ability to achieve revenue recognition on awarded business; its dependence on a limited product line and key customers; its dependence on key employees; its ability to compete in our industry with companies that are significantly larger and have greater resources than us; its ability to manage costs effectively; its ability to protect its intellectual property rights in a global market; its ability to manufacture product quickly enough to meet potential demand; and other risks and uncertainties described more fully in Procera's 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 described in the "Risk Factors" sections of its Form 10-K filed for the year ended December 31, 2013 and its Form 10-Qs filed for the quarters ended March 31, 2014, and June 30, 2014, and other reports filed with the SEC, which are available free of charge on the SEC's website at http://www.sec.gov and on Procera's website at http://www.proceranetworks.com. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements in this press release are based on information available to Procera as of the date hereof, and Procera undertakes no obligation to update, amend or clarify any forward-looking statement for any reason.
Use of Non-GAAP Financial Information
In addition to the financial results presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures. Our management regularly uses these supplemental non-GAAP financial measures internally to understand and manage our business and forecast future periods and believes that these non-GAAP financial measures, when taken together with the corresponding GAAP measures, provide incremental insight into the underlying factors and trends affecting both Procera's performance and its cash-generating potential.
Our non-GAAP financial measures include adjustments for stock-based compensation expenses; business development expenses; cost reduction efforts; and acquisition-related intangible asset and deferred compensation amortization, impairment and tax effects. We have excluded the effect of stock-based compensation; the cost of outside professional services for negotiating and performing legal, accounting and tax due diligence for potential mergers and acquisitions; expenses connected with cost reduction efforts; and acquisition-related intangible asset and deferred compensation amortization, impairment, and tax effects, from our non-GAAP gross profit, operating expenses and net income measures. Stock-based compensation, which represents the estimated fair value of stock options, restricted stock and restricted stock units granted to employees, is excluded since grant activities vary significantly from quarter to quarter in both quantity and fair value. In addition, although stock-based compensation will recur in future periods, excluding this expense allows us to better compare core operating results with those of our competitors who also generally exclude stock-based compensation from their core operating results, and who may have different granting patterns and types of equity awards and who may use different option valuation assumptions than we do. Business development expenses are necessary as part of certain growth strategies, such as through mergers and acquisitions, and will occur when such transactions are pursued. We have excluded these expenses because they can vary materially from period-to-period and transaction-to-transaction and expenses associated with these business development activities are not considered a key measure of Procera's operating performance. Cost reduction efforts occur with shifts in objectives and evolving requirements of the business and can result in fluctuating expenses connected with reducing employment in certain areas. We have excluded these expenses because they can vary significantly from period-to-period and are not considered a key measure of Procera's operating performance. Acquisition-related intangible asset and deferred compensation amortization, impairment and tax effects represent non-cash charges and benefits that result from the accounting for acquisitions. We have excluded these items because, in any period, they may not directly correlate to the underlying performance of Procera's business and these items can vary materially from period-to-period and transaction-to-transaction. In addition, we exclude these acquisition-related costs and benefits when evaluating our current operating performance.
Our non-GAAP financial measures may not reflect the full economic impact of Procera's activities. 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, including Procera's competitors. As such, this presentation of non-GAAP financial measures may not enhance the comparability of Procera's results to the results of other companies. Investors are cautioned not to place undue reliance on our non-GAAP financial measures. In addition, investors are cautioned that these non-GAAP financial measures are not intended to be considered in isolation and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP.
For a reconciliation 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."
About Procera Networks Inc.
Procera Networks, Inc. (NASDAQ: PKT), the Global Subscriber Experience company, is revolutionizing the way operators and vendors monitor, manage and monetize their network traffic. Elevate your business value and improve customer experience with Procera's sophisticated intelligence solutions. For more information, visit www.proceranetworks.com or follow Procera on Twitter at @ProceraNetworks.
Investor Relations Contact
Michael Bishop
Blueshirt Group (for Procera Networks)
mike@blueshirtgroup.com
1-415-217-4968
Media Contact
Bob Eastwood
Engage PR (for Procera Networks)
beastwood@engagepr.com
1-510-748-8200 x215
Procera Networks, Inc.
Condensed Consolidated Statements of Operations
Unaudited
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2014 2013 2014 2013
---- ---- ---- ----
Sales:
Product sales $11,164 $16,301 $35,792 $40,328
Support sales 4,945 5,032 15,466 13,015
Total sales 16,109 21,333 51,258 53,343
Cost of sales:
Product cost of
sales 4,774 10,080 17,645 22,451
Support cost of
sales 1,118 896 3,269 2,442
Total cost of sales 5,892 10,976 20,914 24,893
----- ------ ------ ------
Gross profit 10,217 10,357 30,344 28,450
------ ------ ------ ------
63.4% 48.5% 59.2% 53.3%
Operating expenses:
Research and
development 4,096 3,945 12,360 12,532
Sales and
marketing 6,497 7,322 20,425 21,293
General and
administrative 2,760 2,510 8,311 9,498
Impairment of
goodwill and
purchased
intangible
assets 12,380 - 12,380 -
Total operating expenses 25,733 13,777 53,476 43,323
------ ------ ------ ------
Loss from operations (15,516) (3,420) (23,132) (14,873)
------- ------ ------- -------
Interest and other income (expense), net (356) 232 (245) 203
---- --- ---- ---
Loss before
income taxes (15,872) (3,188) (23,377) (14,670)
Income tax benefit (160) (205) (281) (1,688)
---- ---- ---- ------
Net loss $(15,712) $(2,983) $(23,096) $(12,982)
Net loss per share - basic and diluted $(0.77) $(0.15) $(1.13) $(0.65)
====== ====== ====== ======
Shares used in computing net loss per share:
Basic and diluted 20,500 20,031 20,395 20,007
Procera Networks, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2014 2013
---- ----
(unaudited)
ASSETS
Current Assets:
Cash and cash
equivalents $14,248 $90,774
Short-term
investments 87,921 15,789
Accounts
receivable,
net of
allowance 19,941 25,008
Inventories,
net 15,917 18,836
Prepaid
expenses and
other 3,351 2,128
Total current assets 141,378 152,535
Property and
equipment, net 7,603 7,121
Intangible
assets, net 3,320 6,270
Goodwill 960 12,326
Deferred tax
asset 866 1,101
Other non-
current assets 120 83
Total assets $154,247 $179,436
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts
payable $3,811 $7,305
Deferred
revenue 11,944 11,633
Accrued
liabilities 5,691 6,721
Total current liabilities 21,446 25,659
Non-current liabilities:
Deferred
revenue 3,116 3,273
Deferred tax
liability 866 1,690
Deferred rent 122 143
Total liabilities 25,550 30,765
Commitments and contingencies - -
Stockholders' equity:
Common stock 21 21
Additional
paid-in
capital 223,844 219,763
Accumulated
other
comprehensive
loss (2,856) (1,897)
Accumulated
deficit (92,312) (69,216)
Total stockholders' equity 128,697 148,671
------- -------
Total liabilities and stockholders'
equity $154,247 $179,436
======== ========
Procera Networks, Inc.
GAAP to Non-GAAP Reconciliation; and Supplemental Financial Information
Unaudited
(in thousands, except per share data)
Three Months Ended Nine Months Ended
------------------ -----------------
September 2014 June 2014 September 2013 September 2014 September 2013
-------------- --------- -------------- -------------- --------------
Sales:
Product sales $11,164 $15,124 $16,301 $35,792 $40,328
Support sales 4,945 5,484 5,032 15,466 13,015
Total sales 16,109 20,608 21,333 51,258 53,343
Cost of sales:
Product cost of sales,
GAAP 4,774 7,780 10,080 17,645 22,451
Non-GAAP
adjustments:
Stock-based compensation (1) (7) (7) (19) (29) (58)
Amortization of intangibles (2) (264) (267) (275) (793) (819)
Cost reduction efforts (3) - - - (237) -
--- --- --- ---- ---
Product cost of
sales, non-GAAP 4,503 7,506 9,786 16,586 21,574
Support cost of sales,
GAAP 1,118 1,085 896 3,269 2,442
Non-GAAP
adjustments:
Stock-based compensation (1) (85) (86) (82) (253) (223)
--- --- --- ---- ----
Support cost of
sales, non-GAAP 1,033 999 814 3,016 2,219
----- --- --- ----- -----
Total cost of
sales, non-GAAP 5,536 8,505 10,600 19,602 23,793
----- ----- ------ ------ ------
Gross profit, non-
GAAP 10,573 12,103 10,733 31,656 29,550
------ ------ ------ ------ ------
65.6% 58.7% 50.3% 61.8% 55.4%
Operating expenses:
Research and
development 4,096 3,716 3,945 12,360 12,532
Non-GAAP
adjustments:
Stock-based compensation (1) (314) (296) (218) (998) (933)
Cost reduction efforts (3) - - - (206) -
Deferred compensation (5) - - (753) (65) (2,193)
--- --- ---- --- ------
Research and
development, non-
GAAP 3,782 3,420 2,974 11,091 9,406
Sales and marketing 6,497 7,051 7,322 20,425 21,293
Non-GAAP
adjustments:
Stock-based compensation (1) (443) (398) (385) (1,249) (1,348)
Amortization of intangibles (2) (114) (115) (117) (342) (353)
Cost reduction efforts (3) (327) (114) - (515) -
Deferred compensation (5) - - (716) - (2,086)
--- --- ---- --- ------
Sales and
marketing, non-
GAAP 5,613 6,424 6,104 18,319 17,506
General and
administrative 2,760 2,442 2,510 8,311 9,498
Non-GAAP
adjustments:
Stock-based compensation (1) (429) (351) (365) (1,200) (1,252)
Cost reduction efforts (3) - - - (27) -
Business development expenses (6) - - - - (1,616)
General and
administrative,
non-GAAP 2,331 2,091 2,145 7,084 6,630
Impairment of goodwill
and purchased
intangible assets 12,380 - - 12,380 -
Non-GAAP
adjustments:
Impairment of goodwill and purchased
intangible assets (4) (12,380) - - (12,380) -
Impairment of
goodwill and
purchased
intangible
assets, non-GAAP - - - - -
Total operating
expenses, non-
GAAP 11,726 11,935 11,223 36,494 33,542
------ ------ ------ ------ ------
Income (loss) from operations, non-GAAP (1,153) 168 (490) (4,838) (3,992)
------ --- ---- ------ ------
Interest and other income (expense), net (356) 83 232 (245) 203
---- --- --- ---- ---
Income (loss) before
income taxes, non-
GAAP (1,509) 251 (258) (5,083) (3,789)
Income tax provision (benefit) (160) 25 (205) (281) (1,688)
Non-GAAP
adjustment (7) 192 207 136 578 1,550
--- --- --- --- -----
Income tax provision
(benefit), non-GAAP 32 232 (69) 297 (138)
Net income (loss),
non-GAAP $(1,541) $19 $(189) $(5,380) $(3,651)
Net income (loss) per share - diluted, non-GAAP $(0.08) $0.00 $(0.01) $(0.26) $(0.18)
====== ===== ====== ====== ======
Shares used in computing diluted net income (loss) per share 20,500 20,356 20,031 20,395 20,007
20144
Reconciliation of Net Income (Loss):
U.S. GAAP as reported $(15,712) $(1,408) $(2,983) $(23,096) $(12,982)
Non-GAAP
adjustments:
Stock-based compensation (1) 1,278 1,138 1,069 3,729 3,814
Amortization of intangibles (2) 378 382 392 1,135 1,172
Cost reduction efforts (3) 327 114 - 985 -
Impairment of goodwill and purchased
intangible assets (4) 12,380 - - 12,380 -
Deferred compensation (5) - - 1,469 65 4,279
Business development expenses (6) - - - - 1,616
Income tax adjustment (7) (192) (207) (136) (578) (1,550)
As Adjusted $(1,541) $19 $(189) $(5,380) $(3,651)
-
Reconciliation of Diluted Net Income (Loss) Per Share:
U.S. GAAP as reported $(0.77) $(0.07) $(0.15) $(1.13) $(0.65)
Non-GAAP
adjustments:
Stock-based compensation (1) 0.06 0.05 0.05 0.18 0.19
Amortization of intangibles (2) 0.02 0.02 0.02 0.06 0.06
Cost reduction efforts (3) 0.02 0.01 - 0.04 -
Impairment of goodwill and purchased
intangible assets (4) 0.60 - - 0.61 -
Deferred compensation (5) - - 0.08 - 0.22
Business development expenses (6) - - - - 0.08
Income tax adjustment (7) (0.01) (0.01) (0.01) (0.02) (0.08)
----- ----- ----- ----- -----
As Adjusted $(0.08) $0.00 $(0.01) $(0.26) $(0.18)
Shares used in computing diluted net income (loss) per share 20,500 20,356 20,031 20,395 20,007
(1) Stock-based compensation expense
is calculated in accordance with the
fair value recognition provisions of
ASC Topic 718.
(2) Amortization expense associated
with intangible assets acquired in
the Vineyard Networks acquisition.
(3) Severance and other employee-
related costs in connection with the
Company's cost-reduction efforts.
(4) Impairment charges to write-down
the carrying value of goodwill and
purchased intangible assets
associated with the Vineyard
acquisition as a result of lower
than anticipated total addressable
market and revenue growth of NAVL
products.
(5) Amortization of amounts paid
under retention agreements with
Vineyard's three founders. These
amounts were paid during the first
quarter of fiscal year 2014, after
one year of continuous employment
with the Company.
(6) Includes the cost of outside
professional services for
negotiating and performing legal,
accounting and tax due diligence for
potential mergers, acquisitions and
other significant partnership
arrangements.
(7) Income tax benefit associated
with the following Vineyard
acquisition related items:
- reversal of Vineyard's pre-
existing income tax valuation
allowance upon acquisition;
-amortization of acquired intangible
assets; and
-Canadian valuation allowance and
book to tax differences on deferred
revenue.
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SOURCE Procera Networks, Inc.
