Alphasmart (NASDAQ:ALSM)
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AlphaSmart Announces Third Quarter 2004 Results
LOS GATOS, Calif., Oct. 14 /PRNewswire-FirstCall/ -- AlphaSmart, Inc.
(NASDAQ:ALSM) today announced its operating results for the third quarter ended
September 30, 2004. Final results were consistent with the preliminary
expectations disclosed by the company on October 5, 2004.
Net revenue was $8.8 million, compared with $10.6 million for the third quarter
of 2003. Net income under generally accepted accounting principles (GAAP) was
$840,000, or $0.06 per share on a fully diluted basis. This compared with net
income under GAAP for the third quarter of 2003 of $928,000, or $0.08 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 third quarter of 2004 from 10.9
million shares for the same quarter a year earlier.
"Softness in technology spending in the K-12 education market has continued to
impact our quarterly revenue and earnings, as well as our outlook for full-year
2004," said Ketan D. Kothari, AlphaSmart chairman and chief executive officer.
"As indicated previously, we have been particularly vulnerable to deferred
purchasing decisions by certain school districts. However, we remain confident
of both our profitable business model and the long-term growth potential of the
K-12 opportunity for AlphaSmart products."
For the nine months ended September 30, 2004, AlphaSmart's net revenue was
$28.7 million, compared with $30.6 million for the same period of 2003. Net
income under GAAP was $2.4 million, or $0.17 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 nine months of 2003 of $3.0
million, or $0.27 per share on a fully diluted basis, including the effect of
$541,000 in interest paid on mandatorily redeemable preferred stock. Excluding
the effects of the interest and premium described above, pro forma net income
for the nine months of 2004 was $3.0 million, or $0.21 per share on a fully
diluted basis, compared with $3.6 million, or $0.33 per share on a fully
diluted basis, for the nine months a year ago. Nine-month weighted average
shares outstanding increased year-over-year by 34% from 10.9 million to 14.6
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 related to this preferred stock.
Forward-Looking Guidance
For fiscal year 2004, AlphaSmart expects net revenue in the range of $38
million to $40 million; GAAP net income per share on a fully diluted basis in
the range of $0.24 to $0.27; and pro forma net income per share on a fully
diluted basis in the range of $0.28 to $0.31, 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 teleconference on quarterly results at
2:00 p.m. PDT / 5:00 p.m. EDT today. This call will be webcast live and
archived 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 889148, through October 21, 2004.
AlphaSmart intends to discuss financial and other statistical information on
today's teleconference. 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 third quarter of 2003 and the nine months of 2004 and
2003, respectively, in the attached financial statements.
AlphaSmart, Inc.
AlphaSmart, Inc. is a provider of technology solutions for education and
productivity. Its portable computer-companion products are used by students to
enhance writing, keyboarding and comprehension, and have been adopted by more
than 8,000 school districts in the United States and other countries. Based in
Los Gatos, California, the company 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 confidence that
we have a profitable business model and that there is long-term growth
potential in the K-12 education market for our products; (ii) our having no
further interest or premium obligations for mandatorily redeemable preferred
stock; and (iii) 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 its Quarterly Reports on Form 10-Q. AlphaSmart does not
undertake to update any forward-looking statements.
NOTE: AlphaSmart is a registered trademark of AlphaSmart, Inc. in the United
States and other countries. All other trademarks are the property of their
respective owners.
ALPHASMART, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2004 2003
ASSETS
Current assets:
Cash and cash equivalents $4,460 $2,285
Accounts receivable, net 5,652 4,405
Inventory 4,708 2,818
Other current assets 2,252 1,470
Total current assets 17,072 10,978
Property and equipment, net 626 709
Other assets 2,767 2,005
Total assets $20,465 $13,692
LIABILITIES, REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $1,887 $1,892
Accrued liabilities 1,887 3,957
Income taxes payable 1,139 625
Borrowings under loan facility, current portion -- 2,680
Capital lease obligations, current portion 90 76
Total current liabilities 5,003 9,230
Borrowings against line of credit -- 873
Borrowings under loan facility, net of current
portion -- 1,340
Capital lease obligations, net of current portion 48 106
Other long-term liabilities 18 60
Mandatorily redeemable preferred stock -- 9,747
Total liabilities 5,069 21,356
Redeemable convertible preferred stock -- 13,468
Stockholders' equity (deficit) 15,396 (21,132)
Total liabilities, redeemable convertible
preferred stock and
stockholders' equity (deficit) $20,465 $13,692
ALPHASMART, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September September September September
30, 30, 30, 30,
2004 2003 2004 2003
Net revenue $8,795 $10,590 $28,656 $30,600
Cost of revenue 4,185 5,428 13,372 14,868
Gross margin 4,610 5,162 15,284 15,732
Operating expenses:
Research and
development 596 764 1,843 2,409
Sales and marketing 1,638 1,522 5,334 4,414
General and
administrative 1,111 1,072 3,344 3,096
Total operating
expenses 3,345 3,358 10,521 9,919
Operating profit 1,265 1,804 4,763 5,813
Other expense, net (3) (257) (628) (795)
Profit before income
taxes 1,262 1,547 4,135 5,018
Provision for income
taxes (422) (619) (1,703) (2,007)
Net income $840 $928 $2,432 $3,011
Net income per share:
Basic $0.06 $0.17 $0.18 $0.55
Diluted $0.06 $0.08 $0.17 $0.27
Shares used in
computing per
share amounts:
Basic 14,724 5,552 13,478 5,533
Diluted 15,116 10,907 14,627 10,895
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 Nine Months Ended
September September September September
30, 30, 30, 30,
2004 2003 2004 2003
Net revenue $8,795 $10,590 $28,656 $30,600
Cost of revenue 4,185 5,428 13,372 14,868
Gross margin 4,610 5,162 15,284 15,732
Operating expenses:
Research and development 596 764 1,843 2,409
Sales and marketing 1,638 1,522 5,334 4,414
General and
administrative 1,111 1,072 3,344 3,096
Total operating
expenses 3,345 3,358 10,521 9,919
Operating profit 1,265 1,804 4,763 5,813
Other expense, net (3) (73) (40) (254)
Profit before income taxes 1,262 1,731 4,723 5,559
Provision for income taxes (422) (619) (1,703) (2,007)
Net income $840 $1,112 $3,020 $3,552
Net income per share:
Basic $0.06 $0.20 $0.22 $0.64
Diluted $0.06 $0.10 $0.21 $0.33
Shares used in
computing per
share amounts:
Basic 14,724 5,552 13,478 5,533
Diluted 15,116 10,907 14,627 10,895
A reconciliation of our pro forma net income
excluding interest and premium on mandatorily
redeemable preferred stock to our net income
under generally accepted accounting principles
is shown below:
Net income excluding
interest and premium on
mandatorily redeemable
preferred stock $840 $1,112 $3,020 $3,552
Interest and premium on
mandatorily redeemable
preferred stock -- (184) (588) (541)
Net income as reported $840 $928 $2,432 $3,011
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/