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AlphaSmart Announces Final Second Quarter 2004 Results
LOS GATOS, Calif., July 15 /PRNewswire-FirstCall/ -- AlphaSmart, Inc.
(NASDAQ:ALSM) today announced its operating results for the second quarter
ended June 30, 2004. Final results were consistent with the preliminary
expectations disclosed by the company on July 1, 2004.
Net revenue was $11.1 million, compared with $11.7 million for the second
quarter of 2003. Net income under generally accepted accounting principles
(GAAP) was $1.5 million, or $0.10 per share on a fully diluted basis. This
compared with net income under GAAP for the second quarter of 2003 of $1.6
million, or $0.15 per share on a fully diluted basis.
As a result of AlphaSmart's initial public offering in February 2004, the
number of weighted average shares outstanding on a fully diluted basis
increased by 39% to 15.1 million shares for the second quarter of 2004 from
10.9 million shares for the same quarter a year earlier.
"We were disappointed that spending by certain school districts, particularly
those dependent on federal funding, missed our expectations and negatively
impacted our revenue and earnings for the second quarter," said Ketan D.
Kothari, AlphaSmart chairman, chief executive officer and co-founder. "However,
we were pleased with the market's reception of our new low-cost computer
companion for elementary and middle schools, Neo by AlphaSmart, and our new
classroom management solutions for educators, AlphaSmart Manager 2 and
AlphaSmart Manager for Dana. We launched these three products at the National
Education Computer Conference (NECC) on June 21, 2004."
"Despite the unanticipated revenue shortfall in the second quarter, our net
income on a GAAP basis actually increased slightly as a percentage of revenue
from last year," said James M. Walker, vice president, chief financial officer
and chief operating officer. "Gross margin also exceeded our expectations at
56%, compared with 54% for the second quarter of 2003 and 51% for the first
quarter of 2004."
For the six months ended June 30, 2004, AlphaSmart's net revenue was $19.9
million, compared with $20.0 million for the same period of 2003. Net income
under GAAP was $1.6 million, or $0.11 per share on a fully diluted basis, which
included the effect of $588,000 in interest and a premium paid on the
redemption of mandatorily redeemable preferred stock in the first quarter. This
compared with net income under GAAP for the six months of 2003 of $2.1 million,
or $0.19 per share on a fully diluted basis, including the effect of $357,000
in interest paid on mandatorily redeemable preferred stock. Excluding the
effects of the interest and premium described above, pro forma net income for
the six months of 2004 was $2.2 million, or $0.15 per share on a fully diluted
basis, compared with $2.4 million, or $0.22 per share on a fully diluted basis,
for the six months a year ago. Six-month weighted average shares outstanding
increased year-over-year by 33% from 10.9 million to 14.5 million.
All outstanding shares of mandatorily redeemable preferred stock were redeemed
in connection with AlphaSmart's initial public offering of common stock in
February 2004. Accordingly, the company has no further interest or premium
obligations.
Forward-Looking Guidance
For fiscal year 2004, AlphaSmart expects net revenue in the range of $40
million to $42 million; GAAP net income per share on a fully diluted basis in
the range of $0.27 to $0.31; and pro forma net income per share on a fully
diluted basis in the range of $0.31 to $0.35, excluding the effect of $588,000
in interest and a redemption premium paid on mandatorily redeemable preferred
stock in the first quarter of 2004.
AlphaSmart plans to conduct a management conference call on quarterly results
at 2:00 p.m. PDT / 5:00 p.m. EDT today. This call will be webcast live for all
investors on the AlphaSmart website at http://www.alphasmart.com/ir/. In
addition, a phone replay of the call will be available at 719-457-0820, access
code 590412, through July 22, 2004.
AlphaSmart intends to discuss financial and other statistical information on
today's conference call. This information will also be available on the
company's website at http://www.alphasmart.com/ir/, in the webcast described
above.
Use of Non-GAAP Financial Measures
AlphaSmart believes that the supplemental presentation of net income and net
income per share calculations excluding the effects of interest and a premium
paid on the redemption of mandatorily redeemable preferred stock provides
meaningful non-GAAP financial measures to help investors understand and compare
business trends among different reporting periods on a consistent basis,
independently of events impacted by the company's initial public offering in
February 2004 or other infrequent or unusual events. AlphaSmart management
also uses pro forma financial measures to plan and forecast results for future
periods. Readers are cautioned not to view pro forma results as an alternative
to GAAP results or as being comparable to results reported or forecasted by
other companies, and should refer to the reconciliation of GAAP results with
pro forma results for the second quarter of 2003 and the six months of 2004 and
2003, respectively, in the attached financial statements.
AlphaSmart, Inc.
AlphaSmart, Inc. is a provider of technology solutions for the education
market. AlphaSmart's portable computer-companion products are used by students
in 8,000 U.S. school districts to enhance writing, keyboarding and
comprehension. Based in Los Gatos, California, AlphaSmart was founded in 1992
by former Apple Computer engineers.
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements related to (i) our having no further
interest or premium obligations for mandatorily redeemable preferred stock; and
(ii) our expectations of net revenue and GAAP and pro forma net income per
share on a fully diluted basis for the full year, fiscal 2004. Our
expectations and beliefs regarding these matters may not materialize. Actual
results in future periods are subject to risks and uncertainties that could
cause actual results to differ materially from those projected. These risks
include fewer teachers and administrators embracing technology solutions and
one-to-one computing than we expect; our platforms failing to obtain broad
market acceptance; a decline in investment in, or a loss or reduction of
funding for, educational institutions; our need to maintain and develop strong
brand identity; our potential customers choosing the greater functionality
offered by PCs over our platforms; the risk that some government initiatives
may not endorse, or be complementary to, our platforms; risks associated with
the lack of diversity among our product offerings; our Dana by AlphaSmart
platform's dependence on our license with PalmSource; and our dependence on our
suppliers, particularly our single-source suppliers, among other risks. The
forward-looking statements contained in this press release are also subject to
other risks and uncertainties, including those more fully described in
AlphaSmart's filings with the Securities and Exchange Commission (SEC),
including its Registration Statement on Form S-1 declared effective by the SEC
in February 2004 and Quarterly Report on Form 10-Q filed with the SEC in
May 2004. AlphaSmart does not undertake to update any forward-looking
statements.
NOTE: AlphaSmart is a registered trademark of AlphaSmart, Inc. All other
trademarks are the property of their respective owners.
ALPHASMART, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2004 2003
ASSETS
Current assets:
Cash and cash equivalents $7,746 $2,285
Accounts receivable, net 4,690 4,405
Inventory 5,090 2,818
Other current assets 2,533 1,470
Total current assets 20,059 10,978
Property and equipment, net 691 709
Other assets 1,663 2,005
Total assets $22,413 $13,692
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Borrowings against line of credit $873 $--
Accounts payable 3,679 1,892
Accrued liabilities 2,251 3,957
Borrowings under loan facility, current
portion -- 2,680
Other current liabilities 1,192 701
Total current liabilities 7,995 9,230
Borrowings against line of credit -- 873
Borrowings under loan facility, net of current
portion -- 1,340
Other long-term liabilities 99 166
Mandatorily redeemable preferred stock -- 9,747
Total liabilities 8,094 21,356
Redeemable convertible preferred stock -- 13,468
Stockholders' equity (deficit) 14,319 (21,132)
Total liabilities, redeemable convertible
preferred stock and stockholders' equity
(deficit) $22,413 $13,692
ALPHASMART, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
Net revenue $11,075 $11,712 $19,861 $20,010
Cost of revenue 4,906 5,364 9,187 9,440
Gross margin 6,169 6,348 10,674 10,570
Operating expenses:
Research and development 633 884 1,247 1,645
Sales and marketing 1,850 1,481 3,696 2,892
General and administrative 1,256 1,038 2,233 2,024
Total operating expenses 3,739 3,403 7,176 6,561
Operating profit 2,430 2,945 3,498 4,009
Other expense, net (2) (278) (625) (538)
Profit before income taxes 2,428 2,667 2,873 3,471
Provision for income taxes (899) (1,067) (1,281) (1,388)
Net income $1,529 $1,600 $1,592 $2,083
Net income per share:
Basic $0.10 $0.29 $0.12 $0.38
Diluted $0.10 $0.15 $0.11 $0.19
Shares used in computing
per-share amounts:
Basic 14,628 5,524 13,121 5,523
Diluted 15,123 10,885 14,494 10,890
ALPHASMART, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(EXCLUDING INTEREST AND PREMIUM ON
MANDATORILY REDEEMABLE PREFERRED STOCK)
(in thousands, except per-share amounts)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
Net revenue $11,075 $11,712 $19,861 $20,010
Cost of revenue 4,906 5,364 9,187 9,440
Gross margin 6,169 6,348 10,674 10,570
Operating expenses:
Research and development 633 884 1,247 1,645
Sales and marketing 1,850 1,481 3,696 2,892
General and administrative 1,256 1,038 2,233 2,024
Total operating
expenses 3,739 3,403 7,176 6,561
Operating profit 2,430 2,945 3,498 4,009
Other expense, net (2) (98) (37) (181)
Profit before income taxes 2,428 2,847 3,461 3,828
Provision for income taxes (899) (1,067) (1,281) (1,388)
Net income $1,529 $1,780 $2,180 $2,440
Net income per share:
Basic $0.10 $0.32 $0.17 $0.44
Diluted $0.10 $0.16 $0.15 $0.22
Shares used in computing
per-share amounts:
Basic 14,628 5,524 13,121 5,523
Diluted 15,123 10,885 14,494 10,890
A reconciliation of pro forma
net income excluding interest
and premium on mandatorily
redeemable preferred stock to
net income under generally
accepted accounting principles
is shown below:
Net income excluding interest
and premium on mandatorily
redeemable preferred stock $1,529 $1,780 $2,180 $2,440
Interest and premium on
mandatorily redeemable
preferred stock -- (180) (588) (357)
Net income as reported $1,529 $1,600 $1,592 $2,083
DATASOURCE: AlphaSmart, Inc.
CONTACT: investors, James M. Walker, Vice President, Chief Financial
Officer and Chief Operating Officer of AlphaSmart, Inc., +1-408-355-1029, or
Web site: http://www.alphasmart.com/