Neoware (NASDAQ:NWRE)
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Neoware Reports Fiscal 2005 Second Quarter Revenue and Earnings;
Revenues Up 34%, Net Income Up 47%
KING OF PRUSSIA, Pa., Feb. 1 /PRNewswire-FirstCall/ -- Neoware Systems, Inc.
(NASDAQ:NWRE), the leading supplier of software, services and appliances for
thin client computing, today reported record revenues for its fiscal second
quarter and six months ended December 31, 2004.
FY05 Q2 Financial Highlights:
-- Revenues increased 34% to $20,471,000 from $15,322,000 in the prior
year second quarter and were a record for the Company.
-- Gross profit was $8,745,000, or 43% of revenue, compared to
$7,638,000, or 50% of revenue, in the prior year second quarter. Gross
profit margin is consistent with the Company's previously announced
plan to increase market share by introducing new products that compete
more effectively with PCs, focus on larger enterprise customers, and
expand the thin client segment of the PC market.
-- Operating expenses were $5,594,000, or 27% of revenue, compared to
$5,542,000, or 36% of revenue, in the prior year second quarter.
-- Net income increased 48% to $2,066,000, or $.13 per diluted share,
from $1,395,000, or $.09 per diluted share, in the year ago quarter,
reflecting the operating leverage of the Company's software focused
business model.
-- Results include $376,000 of amortization of intangibles as a result of
acquisitions, compared to $317,000 in the prior year quarter.
FY05 Six Month Financial Highlights:
-- Revenues increased 21% to $36,774,000 from $30,336,000 in the prior
year six-month period.
-- Gross profit was $15,836,000, or 43% of revenue, compared to
$15,603,000, or 51% of revenue, in the prior year six-month period.
-- Operating expenses were $10,719,000, or 29% of revenue, compared to
$10,685,000, or 35% of revenue, in the prior year six-month period.
-- Net income was $3,453,000, or $.21 per diluted share, compared to
$3,259,000, or $.20 per diluted share, in the prior year six-month
period.
-- Results include $647,000 of amortization of intangibles as a result of
acquisitions, compared to $503,000 in the prior year six-month period.
"This was a record quarter for Neoware, and we believe that it reflects the
fact that companies around the globe are adopting thin client computing to
improve security and lower the cost of desktop computing," stated Michael
Kantrowitz, Neoware's Chairman and CEO. "We saw significant growth in all
geographies and most notably with enterprise customers both directly and
through our alliance with IBM. The strong demand for Neoware thin client
products and services in this quarter supports our belief that a significant
opportunity exists to grow our business both internally and through
acquisitions.
"Our acquisition program, which has been a key element of our successful growth
strategy over the past several years, is back on track. In September, we
acquired Visara's thin client business, which has now been fully integrated
into Neoware, providing us with innovative new products and important new
customers. After the end of the quarter we entered into a definitive agreement
to acquire TeleVideo's thin client business, and we are now the exclusive
reseller for TeleVideo thin clients worldwide. We believe that this
acquisition will broaden our product offerings and allow us to pursue the
upgrade of millions of TeleVideo green-screen terminals installed worldwide.
After the quarter ended, we acquired Mangrove Systems, an innovative provider
of Linux software for thin clients, which provides us with unique Linux-based
technology and local software development and support expertise in our
important European market.
"While we do not give quarterly guidance, we believe that the combination of
the significant organic growth we delivered this quarter and our recent
acquisitions will lead to continued growth in revenues in calendar 2005 and
beyond," Kantrowitz continued. "While our results in any particular period will
vary due to the timing of individual orders, given the trends we see in our
markets, we now believe that we can achieve revenue growth of 20% to 30% - or
higher - in calendar 2005 compared to calendar 2004. Our gross profit margin
targets during this period will continue to be in the 40% to 45% range and
increases in operating expenses will be consistent with our revenue increases
as we continue to target operating expenses of 30% percent of revenues or less.
"We firmly believe that the cost and security benefits of thin client computing
are becoming increasingly appreciated by technology purchasers and that
Neoware's products and services are gaining market share. This quarter's
financial results demonstrate the strength of our core markets and of Neoware's
profitable business model. Neoware thin client computing is attracting
increasing attention by corporate customers as well as industry and mainstream
press. Our ownership of core software technologies, our software- focused
operating model, and our financial strength make us the clear choice for thin
client customers around the globe," 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 website closer to the
event date.
Thomas Weisel Partners Tech 2005 Conference - Feb. 8, 2005
Roth Capital Partners Growth Stock Conference - Feb. 23, 2005
CONFERENCE CALL INFORMATION
In connection with this release, management of Neoware will host a conference
call at 5:00 PM Eastern Time on February 1, 2005. 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 1-800-895-1715 for domestic calls
and +1-785-424-1059 for international calls. The conference ID will be NEOWARE.
A replay of the call will be available through February 8, 2005 by dialing
1-800-695-2185 domestically and +1-402-530-9028 internationally.
About Neoware
Recently ranked America's eighth fastest-growing company by Fortune Magazine,
Neoware is a leading provider of software, services, and thin client appliances
that make computing more open, secure, reliable, affordable and manageable. By
leveraging open technologies and eliminating the obsolescence that is built
into standard PC architectures, Neoware enables enterprises to leverage
server-based computing to provide 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 and software
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 new product and marketing initiatives; anticipated increased
adoption of thin client computing by our customers; growth opportunities
generated internally and through acquisitions in coming periods; the
consummation of our acquisition of TeleVideo's thin client business and our
belief that the technology to be acquired will broaden our product offerings
and help us build sales; continued growth in revenues in calendar year 2005 and
thereafter; revenue growth and gross profit margin targets and operating
expense increases for the 2005 calendar year; and increased acceptance of thin
client products in the market resulting in a gain in market share. 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 inability to consummate and
successfully integrate the TeleVideo acquisition; our inability 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, Mangrove products and TeleVideo 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, including the
former Mangrove employees; 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 and Form 10-Q for the
quarter ended September 30, 2004.
Neoware is a trademark 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 December 31, June 30,
2004 2004
Current assets:
Cash and cash equivalents $36,286 $17,119
Short-term investments 16,226 38,177
Accounts receivable, net 13,322 10,580
Inventories 3,847 795
Prepaid expenses and other 1,578 1,628
Deferred income taxes 643 643
Total current assets 71,902 68,942
Property and equipment, net 445 509
Goodwill 20,177 17,466
Intangibles, net 4,656 3,545
Deferred income taxes 145 145
$97,325 $90,607
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $4,326 $5,685
Accrued compensation and benefits 1,792 1,534
Other accrued expenses 1,778 1,071
Income taxes payable 2,516 854
Deferred revenue 982 739
Total current liabilities 11,394 9,883
Deferred revenue 278 235
Total liabilities 11,672 10,118
Stockholders' equity:
Preferred stock - -
Common stock 16 16
Additional paid-in capital 72,574 71,718
Treasury stock, 100,000 shares at cost (100) (100)
Accumulated other comprehensive income 1,791 936
Retained earnings 11,372 7,919
Total stockholders' equity 85,653 80,489
$97,325 $90,607
NEOWARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2004 2003 2004 2003
Net revenues $20,471 $15,322 $36,774 $30,336
Cost of revenues 11,726 7,684 20,938 14,733
Gross profit 8,745 7,638 15,836 15,603
Sales and marketing 3,178 3,377 6,281 6,342
Research and development 769 687 1,433 1,408
General and administrative 1,647 1,478 3,005 2,935
Operating expenses 5,594 5,542 10,719 10,685
Operating income 3,151 2,096 5,117 4,918
Foreign exchange loss (214) - (237) -
Interest income, net 193 94 352 177
Income before income
taxes 3,130 2,190 5,232 5,095
Income taxes 1,064 795 1,779 1,836
Net income $2,066 $1,395 $3,453 $3,259
Earnings per share:
Basic $.13 $.09 $.22 $.21
Diluted $.13 $.09 $.21 $.20
Weighted average number of
common shares outstanding:
Basic 15,754 15,743 15,726 15,594
Diluted 16,188 16,285 16,111 16,282
NEOWARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2004 2003 2004 2003
Cash flows from operating
activities:
Net income $2,066 $1,395 $3,453 $3,259
Adjustments to reconcile
net income to net cash
provided by operating
activities
Income tax benefit, primarily
from stock option exercises 101 - 121 1,618
Depreciation 66 64 130 136
Amortization of intangibles 376 317 647 503
Changes in operating assets
and liabilities - net of
effect from acquisition
Accounts receivable (2,508) 422 (2,742) 1,819
Inventories (2,139) 823 (3,052) 33
Prepaid expenses and other (56) (152) 51 (107)
Accounts payable 277 1,921 (1,359) (573)
Accrued expenses 2,082 308 2,631 (421)
Deferred revenue 338 48 285 186
Net cash provided by
operating activities 603 5,146 165 6,453
Cash flows from investing
activities:
Purchase of Visara thin
client business (24) - (3,799) -
Purchase of the TeemTalk
software business - (32) - (9,995)
Purchase of short-term
investments (2,333) (5,847) (20,233) (22,056)
Sales of short-term
investments 24,815 13,431 42,184 14,414
Purchase of intangible
assets - - - (125)
Purchases of property
and equipment (47) (26) (66) (106)
Net cash provided by
(used in) investing
activities 22,411 7,526 18,086 (17,868)
Cash flows from financing
activities:
Repayments of capital leases (2) (1) (5) (3)
Sale of common stock,
net of expenses - - - 24,609
Expenses for prior issuance
of common stock - (3) - (3)
Exercise of stock options
and warrants 666 92 735 830
Net cash provided by
financing activities 664 88 730 25,433
Effect of foreign exchange
rate changes on cash 135 (41) 186 (28)
Increase in cash and
cash equivalents 23,813 12,719 19,167 13,990
Cash and cash equivalents,
beginning of period 12,473 27,285 17,119 26,014
Cash and cash equivalents,
end of period $36,286 $40,004 $36,286 $40,004
Supplemental disclosures:
Cash paid for income taxes $15 $- $46 $264
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/