Redback (NASDAQ:RBAK)
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Redback Networks Inc. (NASDAQ:RBAK), a leading provider of next
generation broadband networking systems, today announced its third
quarter results for the period ending September 30, 2006. Net revenue
increased 95 percent to $70.9 million for the third quarter of 2006
compared to $36.4 million for the same quarter last year. Net revenue
was up 4 percent for the third quarter of 2006 compared to the second
quarter of 2006.
Redback Networks generated $4.5 million in cash in the third quarter of
2006, boosting its overall cash total to $176.0 million. Redback
Networks also added 18 new customers in the third quarter for its
SmartEdge® family of multi-service edge
routers, including a top 20 carrier worldwide. In less than two years,
Redback has won more than 200 SmartEdge customers worldwide, including
12 of the largest 20 carriers. Redback has more than 500 SmartEdge and
SMS customers worldwide, including 15 of the 20 largest carriers.
"On a worldwide basis, Redback continues to drive the wire-line carrier
market in the deployment of triple-play networks,”
said Kevin DeNuccio, president and chief executive officer, Redback
Networks. “Broadband networks are becoming
more video-centric and we believe Redback and SmartEdge technology are
at the center of a paradigm shift in network routing to multi-service
broadband networks.”
“We believe up to 2 billion wireless and
wire-line customers will be upgraded to new broadband networks from 250
million broadband users today,” said DeNuccio. “This
network upgrade is up to ten times larger than the last Internet
build-out. This trend reinforces our vision that a single broadband
network will unify communication and entertainment services over time.
In short, the network is shaping up to be the next mass medium.”
GAAP net loss for the third quarter of 2006 was $2.4 million or $(0.03)
per share attributable to common stockholders compared to a GAAP net
loss of $8.4 million or $(0.15) per share in the third quarter of 2005.
Non-GAAP net income was $9.1 million or $0.12 per share, compared to a
non-GAAP net loss of $4.2 million or $(0.08) per share for the third
quarter of 2005. Excluded from the non-GAAP results for the third
quarter of 2006 were charges relating to amortization of intangible
assets, stock-based compensation, amortization of the fair value of
warrants issued in connection with a lease agreement, certain federal
and state income taxes, and accretion of a dividend payable to preferred
stockholders which was in the second quarter of 2006 and the previous
quarters.
For comparative purposes, GAAP pre-tax income excluding stock-based
compensation for the third quarter of 2006 was $6.4 million, compared
with a GAAP pre-tax loss excluding stock-based compensation of $7.3
million for the third quarter of 2005.
With the adoption of Statement of Financial Accounting Standards No.
123R (FAS 123R) as of January 1, 2006, Redback Networks is reporting
stock-based compensation expense in its generally accepted accounting
principles (GAAP) results.
See the attached table for a reconciliation of our GAAP results to
non-GAAP results.
Third Quarter Conference Call, October 19, 2006, 1:45 p.m.
Redback Networks will discuss these quarterly results in an investor
conference call today at 1:45 p.m. Pacific Time. The conference
telephone number is: Domestic Dial-in: 1-800-559-2403 and International
Dial-in: 1-847-619-6534. A live web cast is also available from the
investor relations portion of the Redback’s
web site, http://ir.redback.com. A
telephone replay of the conference call will be available later in the
day. Replay information will be available at Domestic Dial-in:
1-877-213-9653 and International Dial-in: 1-630-652-3041 Passcode:
15121699. Information on these calls and web cast can also be found on
the company’s web site.
Twelve of the top 20 carriers worldwide deploy Redback's SmartEdge
family of multi-service edge routers to deliver multiple broadband
services to tens of millions of business and residential customers
worldwide. These customers include British Telecom, Belgacom, BellSouth,
China Telecom, China Netcom, Chunghwa Telecom (Korea), France Telecom
and Turk Telecom, among others.
About Redback Networks
Redback Networks Inc. manages 50 million broadband connections
(SMS+SmartEdge products) for 15 of the top 20 carriers worldwide. Redback’s
multi-service routing platform delivers next generation broadband
services such as VoIP, IPTV, Video-on-Demand and on-line gaming. Redback
Networks has more than 500 carrier customers worldwide and is based in
San Jose, CA. In 2006, Redback marks its 10 year anniversary,
celebrating ten years of broadband innovation. For more information,
visit Redback Networks at www.redback.com.
REDBACK and SmartEdge are trademarks registered at the U.S. Patent and
Trademark Office and in other countries. NetOp is a trademark of Redback
Networks Inc. All other products or services mentioned are the
trademark, service marks, registered trademarks or registered service
marks of their respective owners.
Note Regarding Forward Looking Statements
The statements contained in this press release that are not purely
historical are forward-looking statements which are subject to the safe
harbor provisions of the Private Litigation reform Act of 1995. These
statements include but are not limited to statements regarding our
expected financial results, our expectations of continued growth of our
SmartEdge product line and our customer base, expectations regarding the
trend in growth of upgrades to broadband networks and the expected
impact on the growth of the Company as a result of such trends. These
statements are only predictions and involve a number of risks and
uncertainties, the outcome of which could materially and/or adversely
affect Redback’s actual future results. These
risks include without limitation the following: final review of
quarterly results by the Company’s
independent auditors; growth trends in the networking industry and in
various geographic regions; variations in customer demand for products
and services; the timing of orders and manufacturing lead times; changes
in customer order trends or customer or product mix, and other risks
relating to Redback’s business as set forth
in the Annual Report on Form 10-K for the year ended December 31, 2005,
the Quarterly Report on Form 10-Q for the quarter ended June 30, 2006,
and Redback’s other most recent reports on
Form 10-Q and Form 8-K, and amendments thereto, on file with the
Securities and Exchange Commission (SEC), and other reports filed with
the SEC from time to time. All forward-looking statements included in
this document are based upon information available as of the date
hereof, and Redback assumes no obligation to update these statements.
Non-GAAP Disclosure
To supplement our consolidated financial statements presented in
accordance with GAAP, we use non-GAAP financial measures, which are
adjusted from results based on GAAP to exclude certain items. These
non-GAAP measures are provided to enhance the user’s
overall understanding of our current financial performance and our
prospects in the future. Specifically, we believe the non-GAAP measures
provide useful information to both management and investors by excluding
certain items that we believe are not indicative of our core operating
results. The presentation of this additional information is not meant to
be considered in isolation or as a substitute for results prepared in
accordance with United States GAAP.
Redback Networks Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
September 30, 2006
December 31, 2005
Assets
Current assets:
Cash and cash equivalents
$
175,999
$
43,764
Accounts receivable, net
35,551
32,708
Inventories
9,029
12,933
Other current assets
5,825
8,204
Total current assets
226,404
97,609
Property and equipment, net
21,818
16,944
Goodwill
142,532
144,401
Intangibles, net
47,708
55,669
Other assets
1,211
1,391
Total assets
$
439,673
$
316,014
Liabilities, Mandatory Redeemable Convertible Preferred Stock,
and Stockholders' Equity
Current liabilities:
Accounts payable
$
35,290
$
28,664
Accrued liabilities
20,884
14,759
Borrowings and capital lease obligations
317
372
Deferred revenue
18,212
18,288
Total current liabilities
74,703
62,083
Deferred revenue, net of current portion
13,094
7,036
Long term liabilities
1,064
1,579
Total liabilities
88,861
70,698
Mandatory redeemable convertible preferred stock
-
47,897
Stockholders' equity
350,812
197,419
Total liabilities, mandatory redeemable convertible preferred stock
and stockholders' equity
$
439,673
$
316,014
Redback Networks Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
Three Months Ended
Nine Months Ended
September 30, 2006
June 30, 2006
September 30, 2005
September 30, 2006
September 30, 2005
Net revenue
$
70,910
$
68,222
$
36,431
$
196,991
$
105,277
Cost of revenue, excluding amortization
27,368
27,063
15,705
77,037
42,353
Amortization
2,706
2,709
2,726
8,122
8,170
Total cost of revenue
30,074
29,772
18,431
85,159
50,523
Gross profit
40,836
38,450
18,000
111,832
54,754
Operating expenses:
Research and development
22,694
20,158
14,428
59,985
44,254
Selling, general and administrative
22,172
19,696
11,192
59,632
32,329
Total operating expenses
44,866
39,854
25,620
119,617
76,583
Loss from operations
(4,030)
(1,404)
(7,620)
(7,785)
(21,829)
Other income (loss), net
2,105
953
(677)
4,111
(184)
Loss before income taxes
(1,925)
(451)
(8,297)
(3,674)
(22,013)
Provision for income taxes
464
1,316
(52)
2,915
212
Net loss
(2,389)
(1,767)
(8,245)
(6,589)
(22,225)
Deemed dividend and accretion on preferred stock
-
113
155
269
461
Net loss attributable to common stockholders
$
(2,389)
$
(1,880)
$
(8,400)
$
(6,858)
$
(22,686)
Net loss attributable to common stockholders per share:
Basic
$
(0.03)
$
(0.03)
$
(0.15)
$
(0.11)
$
(0.42)
Diluted
$
(0.03)
$
(0.03)
$
(0.15)
$
(0.11)
$
(0.42)
Shares used in computing net loss attributable to common
stockholders per share:
Basic
69,253
61,400
54,649
62,387
54,081
Diluted
69,253
61,400
54,649
62,387
54,081
Three Months Ended
Nine Months Ended
September 30, 2006
June 30, 2006
September 30, 2005
September 30, 2006
September 30, 2005
(1) Includes stock-based compensation expense as follows:
Cost of product revenue
$
665
$
470
$
87
$
1,422
$
265
Research and development
3,036
1,978
205
6,247
657
Selling, general and administrative
4,635
2,892
692
9,077
2,103
Total stock-based compensation expense
$
8,336
$
5,340
$
984
$
16,746
$
3,025
Redback Networks Inc.
Reconciliation of GAAP to Non-GAAP Measures
(In thousands, except per share amounts)
(unaudited)
Three Months Ended
Nine Months Ended
September 30, 2006
June 30, 2006
September 30, 2005
September 30, 2006
September 30, 2005
GAAP net loss
$
(2,389)
$
(1,880)
$
(8,400)
$
(6,858)
$
(22,686)
Adjustments to reconcile GAAP net loss to non-GAAP net income:
Amortization of intangible assets - cost of revenue
2,654
2,654
2,654
7,962
7,962
Amortization of landlord warrants - cost of revenue
52
55
72
160
208
Amortization of landlord warrants - R&D expense
291
289
327
868
1,204
Amortization of landlord warrants - SG&A expense
136
135
80
409
233
Stock-based compensation - cost of revenue
665
470
87
1,422
265
Stock-based compensation - R&D expense
3,036
1,978
205
6,247
657
Stock-based compensation - SG&A expense
4,635
2,892
692
9,077
2,103
Accretion of preferred stock dividend
-
113
155
269
461
Other income
-
-
(43)
(619)
(140)
Income tax effect for Non-GAAP
4
936
-
1,790
-
Non-GAAP net income (loss)
$
9,084
$
7,642
$
(4,171)
$
20,727
$
(9,733)
Non-GAAP net income (loss) per share:
Basic
$
0.13
$
0.12
$
(0.08)
$
0.33
$
(0.18)
Diluted
$
0.12
$
0.10
$
(0.08)
$
0.27
$
(0.18)
Shares used in computing net income (loss) per share:
Basic
69,253
61,400
54,649
62,387
54,081
Diluted
78,876
78,429
54,649
77,487
54,081
Use of Non-GAAP financial information
The non-GAAP information provided in this press release is a
supplement to, and not a substitute for, our financial results
presented in accordance with GAAP. To supplement our condensed
consolidated financial statements presented in accordance with
GAAP, we use non-GAAP financial measures, which are adjusted from
results based on GAAP to exclude certain costs and expenses. These
non-GAAP measures are provided to enhance the user's overall
understanding of our operating performance and our prospects in
the future. Specifically, we believe the non-GAAP measures provide
useful information to both management and investors regarding
financial and business trends relating to our financial
performance by excluding certain costs and expenses that we
believe are not indicative of our core operating results. These
non-GAAP measures are among budgeting and planning tools that
management uses for future forecasting. The presentation of this
additional information is not meant to be considered in isolation
or as a substitute for results prepared in accordance with United
States GAAP.
Stock-based compensation
Redback has incurred stock-based compensation expense under SFAS
123R for fiscal year 2006, and under APB 25 for earlier comparable
periods in its GAAP financial results. We exclude this item for
the purpose of calculating non-GAAP operating income, non-GAAP net
income and non-GAAP net income per share. The exclusion of
stock-based compensation from the non-GAAP measures is done to
allow for a consistent comparison of the Company's relative
historical financial performance, since the method for accounting
for stock-based compensation changed at the beginning of fiscal
year 2006. The nature of stock-based compensation expense also
makes it very difficult to estimate prospectively, since the
expense will vary with changes in the stock price and market
conditions at the time of new grants, varying valuation
methodologies, subjective assumptions and different award types,
making the comparison of current results with forward guidance
potentially difficult for investors to interpret. The tax effects
of stock-based compensation expenses may also vary significantly
from period to period, without any change in underlying
performance, thereby obscuring the underlying profitability of
operations relative to prior periods (including prior periods
following the adoption of SFAS 123R).
Amortization of intangible assets
Amortization of other intangible assets is excluded from the
Company’s non-GAAP financial measures
because it represents a non-cash expense that has no effect on
current or future period cash flows or operations of the Company.
The basis for the amortization comes as a result of the Company’s
emergence from bankruptcy and the adoption of fresh-start
reporting in January 2004, a one-time non-recurring event outside
of the course of normal business operations. This isolated event
and its related financial reporting impact are not indicative of
our ongoing operational performance.
Amortization of fair value of
warrants issued in connection with a lease agreement
Amortization of fair value of warrants issued in connection with a
lease agreement is excluded from the Company’s
non-GAAP financial measures because it represents a non-cash
expense that has no effect on current or future period cash flows
or operations of the Company. As part of the Company’s
bankruptcy plan, the Company rejected all US based operating
leases and entered into new agreements effective January 3, 2004.
In connection with the lease of its corporate headquarters, the
Company issued warrants to the landlord, which were recorded as a
deferred charge and are being amortized over the life of the
original lease which originally expired on October 31, 2006. This
one-time non-recurring event and its related financial reporting
impact are not indicative of our ongoing operational performance.
Income Tax
Amount represents primarily the federal and state income tax
expense from the utilization of pre-bankruptcy tax net operating
losses that was recorded as a reduction of goodwill for GAAP
purposes, off set by federal and state alternative minimum taxes
used for non-GAAP purposes.
Redback Networks Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended
Nine months ended
September 30, 2006
September 30, 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss before deemed dividend and accretion on preferred stock
$
(6,589)
$
(22,225)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization
17,608
20,029
Stock-based compensation
16,746
3,025
Gain on sale of investment
(619)
—
Changes in assets and liabilities:
Accounts receivable, net
(2,843)
3,310
Inventories
(1,997)
(7,433)
Other assets
1,290
(2,113)
Accounts payable and accrued liabilities
14,620
4,234
Deferred revenue
5,982
(1,016)
Other long-term liabilities
(91)
(267)
Net cash provided by (used in) operating activities
44,107
(2,456)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
(7,135)
(7,080)
Proceeds from sale of equity investments
619
—
Net cash used in investing activities
(6,516)
(7,080)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock and exercise of warrants
12,030
7,663
Proceeds from bank borrowings
—
4,000
Principal payments on capital lease obligations
(479)
(2,169)
Proceeds from issuance of common stock upon offering (net of
issuance cost)
83,093
—
Net cash provided by financing activities
94,644
9,494
Net increase (decrease) in cash and cash equivalents
132,235
(42)
Cash and cash equivalents at beginning of period
43,764
42,558
Cash and Cash equivalents at end of period
$
175,999
$
42,516
Redback Networks Inc. (NASDAQ:RBAK), a leading provider of next
generation broadband networking systems, today announced its third
quarter results for the period ending September 30, 2006. Net revenue
increased 95 percent to $70.9 million for the third quarter of 2006
compared to $36.4 million for the same quarter last year. Net revenue
was up 4 percent for the third quarter of 2006 compared to the second
quarter of 2006.
Redback Networks generated $4.5 million in cash in the third
quarter of 2006, boosting its overall cash total to $176.0 million.
Redback Networks also added 18 new customers in the third quarter for
its SmartEdge(R) family of multi-service edge routers, including a top
20 carrier worldwide. In less than two years, Redback has won more
than 200 SmartEdge customers worldwide, including 12 of the largest 20
carriers. Redback has more than 500 SmartEdge and SMS customers
worldwide, including 15 of the 20 largest carriers.
"On a worldwide basis, Redback continues to drive the wire-line
carrier market in the deployment of triple-play networks," said Kevin
DeNuccio, president and chief executive officer, Redback Networks.
"Broadband networks are becoming more video-centric and we believe
Redback and SmartEdge technology are at the center of a paradigm shift
in network routing to multi-service broadband networks."
"We believe up to 2 billion wireless and wire-line customers will
be upgraded to new broadband networks from 250 million broadband users
today," said DeNuccio. "This network upgrade is up to ten times larger
than the last Internet build-out. This trend reinforces our vision
that a single broadband network will unify communication and
entertainment services over time. In short, the network is shaping up
to be the next mass medium."
GAAP net loss for the third quarter of 2006 was $2.4 million or
$(0.03) per share attributable to common stockholders compared to a
GAAP net loss of $8.4 million or $(0.15) per share in the third
quarter of 2005.
Non-GAAP net income was $9.1 million or $0.12 per share, compared
to a non-GAAP net loss of $4.2 million or $(0.08) per share for the
third quarter of 2005. Excluded from the non-GAAP results for the
third quarter of 2006 were charges relating to amortization of
intangible assets, stock-based compensation, amortization of the fair
value of warrants issued in connection with a lease agreement, certain
federal and state income taxes, and accretion of a dividend payable to
preferred stockholders which was in the second quarter of 2006 and the
previous quarters.
For comparative purposes, GAAP pre-tax income excluding
stock-based compensation for the third quarter of 2006 was $6.4
million, compared with a GAAP pre-tax loss excluding stock-based
compensation of $7.3 million for the third quarter of 2005.
With the adoption of Statement of Financial Accounting Standards
No. 123R (FAS 123R) as of January 1, 2006, Redback Networks is
reporting stock-based compensation expense in its generally accepted
accounting principles (GAAP) results.
See the attached table for a reconciliation of our GAAP results to
non-GAAP results.
Third Quarter Conference Call, October 19, 2006, 1:45 p.m.
Redback Networks will discuss these quarterly results in an
investor conference call today at 1:45 p.m. Pacific Time. The
conference telephone number is: Domestic Dial-in: 1-800-559-2403 and
International Dial-in: 1-847-619-6534. A live web cast is also
available from the investor relations portion of the Redback's web
site, http://ir.redback.com. A telephone replay of the conference call
will be available later in the day. Replay information will be
available at Domestic Dial-in: 1-877-213-9653 and International
Dial-in: 1-630-652-3041 Passcode: 15121699. Information on these calls
and web cast can also be found on the company's web site.
Twelve of the top 20 carriers worldwide deploy Redback's SmartEdge
family of multi-service edge routers to deliver multiple broadband
services to tens of millions of business and residential customers
worldwide. These customers include British Telecom, Belgacom,
BellSouth, China Telecom, China Netcom, Chunghwa Telecom (Korea),
France Telecom and Turk Telecom, among others.
About Redback Networks
Redback Networks Inc. manages 50 million broadband connections
(SMS+SmartEdge products) for 15 of the top 20 carriers worldwide.
Redback's multi-service routing platform delivers next generation
broadband services such as VoIP, IPTV, Video-on-Demand and on-line
gaming. Redback Networks has more than 500 carrier customers worldwide
and is based in San Jose, CA. In 2006, Redback marks its 10 year
anniversary, celebrating ten years of broadband innovation. For more
information, visit Redback Networks at www.redback.com.
REDBACK and SmartEdge are trademarks registered at the U.S. Patent
and Trademark Office and in other countries. NetOp is a trademark of
Redback Networks Inc. All other products or services mentioned are the
trademark, service marks, registered trademarks or registered service
marks of their respective owners.
Note Regarding Forward Looking Statements
The statements contained in this press release that are not purely
historical are forward-looking statements which are subject to the
safe harbor provisions of the Private Litigation reform Act of 1995.
These statements include but are not limited to statements regarding
our expected financial results, our expectations of continued growth
of our SmartEdge product line and our customer base, expectations
regarding the trend in growth of upgrades to broadband networks and
the expected impact on the growth of the Company as a result of such
trends. These statements are only predictions and involve a number of
risks and uncertainties, the outcome of which could materially and/or
adversely affect Redback's actual future results. These risks include
without limitation the following: final review of quarterly results by
the Company's independent auditors; growth trends in the networking
industry and in various geographic regions; variations in customer
demand for products and services; the timing of orders and
manufacturing lead times; changes in customer order trends or customer
or product mix, and other risks relating to Redback's business as set
forth in the Annual Report on Form 10-K for the year ended December
31, 2005, the Quarterly Report on Form 10-Q for the quarter ended June
30, 2006, and Redback's other most recent reports on Form 10-Q and
Form 8-K, and amendments thereto, on file with the Securities and
Exchange Commission (SEC), and other reports filed with the SEC from
time to time. All forward-looking statements included in this document
are based upon information available as of the date hereof, and
Redback assumes no obligation to update these statements.
Non-GAAP Disclosure
To supplement our consolidated financial statements presented in
accordance with GAAP, we use non-GAAP financial measures, which are
adjusted from results based on GAAP to exclude certain items. These
non-GAAP measures are provided to enhance the user's overall
understanding of our current financial performance and our prospects
in the future. Specifically, we believe the non-GAAP measures provide
useful information to both management and investors by excluding
certain items that we believe are not indicative of our core operating
results. The presentation of this additional information is not meant
to be considered in isolation or as a substitute for results prepared
in accordance with United States GAAP.
-0-
*T
Redback Networks Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
------------------------------------
September 30, 2006 December 31, 2005
------------------ -----------------
Assets
Current assets:
Cash and cash equivalents $ 175,999 $ 43,764
Accounts receivable, net 35,551 32,708
Inventories 9,029 12,933
Other current assets 5,825 8,204
------------------ -----------------
Total current assets 226,404 97,609
Property and equipment, net 21,818 16,944
Goodwill 142,532 144,401
Intangibles, net 47,708 55,669
Other assets 1,211 1,391
------------------ -----------------
Total assets $ 439,673 $ 316,014
================== =================
Liabilities, Mandatory Redeemable Convertible
Preferred Stock, and Stockholders' Equity
Current liabilities:
Accounts payable $ 35,290 $ 28,664
Accrued liabilities 20,884 14,759
Borrowings and capital lease
obligations 317 372
Deferred revenue 18,212 18,288
------------------ -----------------
Total current liabilities 74,703 62,083
Deferred revenue, net of current
portion 13,094 7,036
Long term liabilities 1,064 1,579
------------------ -----------------
Total liabilities 88,861 70,698
Mandatory redeemable convertible
preferred stock - 47,897
Stockholders' equity 350,812 197,419
------------------ -----------------
Total liabilities, mandatory
redeemable convertible
preferred stock and
stockholders' equity $ 439,673 $ 316,014
================== =================
*T
-0-
*T
Redback Networks Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
---------------------------- -------------------
September June 30, September September September
30, 2006 2006 30, 2005 30, 2006 30, 2005
--------- -------- --------- --------- ---------
Net revenue $ 70,910 $68,222 $ 36,431 $196,991 $105,277
Cost of revenue,
excluding
amortization 27,368 27,063 15,705 77,037 42,353
Amortization 2,706 2,709 2,726 8,122 8,170
--------- -------- --------- --------- ---------
Total cost of
revenue 30,074 29,772 18,431 85,159 50,523
--------- -------- --------- --------- ---------
Gross profit 40,836 38,450 18,000 111,832 54,754
--------- -------- --------- --------- ---------
Operating expenses:
Research and
development 22,694 20,158 14,428 59,985 44,254
Selling, general
and administrative 22,172 19,696 11,192 59,632 32,329
--------- -------- --------- --------- ---------
Total operating
expenses 44,866 39,854 25,620 119,617 76,583
--------- -------- --------- --------- ---------
Loss from operations (4,030) (1,404) (7,620) (7,785) (21,829)
Other income (loss),
net 2,105 953 (677) 4,111 (184)
--------- -------- --------- --------- ---------
Loss before income
taxes (1,925) (451) (8,297) (3,674) (22,013)
Provision for income
taxes 464 1,316 (52) 2,915 212
--------- -------- --------- --------- ---------
Net loss (2,389) (1,767) (8,245) (6,589) (22,225)
Deemed dividend and
accretion on
preferred stock - 113 155 269 461
--------- -------- --------- --------- ---------
Net loss attributable
to common
stockholders $ (2,389) $(1,880) $ (8,400) $ (6,858) $(22,686)
========= ======== ========= ========= =========
Net loss attributable
to common
stockholders per
share:
Basic $ (0.03) $ (0.03) $ (0.15) $ (0.11) $ (0.42)
========= ======== ========= ========= =========
Diluted $ (0.03) $ (0.03) $ (0.15) $ (0.11) $ (0.42)
========= ======== ========= ========= =========
Shares used in
computing net loss
attributable to
common stockholders
per share:
Basic 69,253 61,400 54,649 62,387 54,081
========= ======== ========= ========= =========
Diluted 69,253 61,400 54,649 62,387 54,081
========= ======== ========= ========= =========
Three Months Ended Nine Months Ended
---------------------------- -------------------
September June 30, September September September
30, 2006 2006 30, 2005 30, 2006 30, 2005
--------- -------- --------- --------- ---------
(1) Includes stock-
based compensation
expense as follows:
Cost of product
revenue $ 665 $ 470 $ 87 $ 1,422 $ 265
Research and
development 3,036 1,978 205 6,247 657
Selling, general
and
administrative 4,635 2,892 692 9,077 2,103
--------- -------- --------- --------- ---------
Total stock-based
compensation expense $ 8,336 $ 5,340 $ 984 $ 16,746 $ 3,025
========= ======== ========= ========= =========
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Redback Networks Inc.
Reconciliation of GAAP to Non-GAAP Measures
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
---------------------------- -------------------
September June 30, September September September
30, 2006 2006 30, 2005 30, 2006 30, 2005
--------- -------- --------- --------- ---------
GAAP net loss $ (2,389) $(1,880) $ (8,400) $ (6,858) $(22,686)
Adjustments to
reconcile GAAP net
loss to non-GAAP net
income:
Amortization of
intangible assets -
cost of revenue 2,654 2,654 2,654 7,962 7,962
Amortization of
landlord warrants -
cost of revenue 52 55 72 160 208
Amortization of
landlord warrants -
R&D expense 291 289 327 868 1,204
Amortization of
landlord warrants -
SG&A expense 136 135 80 409 233
Stock-based
compensation - cost
of revenue 665 470 87 1,422 265
Stock-based
compensation - R&D
expense 3,036 1,978 205 6,247 657
Stock-based
compensation - SG&A
expense 4,635 2,892 692 9,077 2,103
Accretion of
preferred stock
dividend - 113 155 269 461
Other income - - (43) (619) (140)
Income tax effect for
Non-GAAP 4 936 - 1,790 -
--------- -------- --------- --------- ---------
Non-GAAP net income
(loss) $ 9,084 $ 7,642 $ (4,171) $ 20,727 $ (9,733)
========= ======== ========= ========= =========
Non-GAAP net income
(loss) per share:
Basic $ 0.13 $ 0.12 $ (0.08) $ 0.33 $ (0.18)
========= ======== ========= ========= =========
Diluted $ 0.12 $ 0.10 $ (0.08) $ 0.27 $ (0.18)
========= ======== ========= ========= =========
Shares used in
computing net income
(loss) per share:
Basic 69,253 61,400 54,649 62,387 54,081
========= ======== ========= ========= =========
Diluted 78,876 78,429 54,649 77,487 54,081
========= ======== ========= ========= =========
Use of Non-GAAP financial information
The non-GAAP information provided in this press release is a
supplement to, and not a substitute for, our financial results
presented in accordance with GAAP. To supplement our condensed
consolidated financial statements presented in accordance with GAAP,
we use non-GAAP financial measures, which are adjusted from results
based on GAAP to exclude certain costs and expenses. These non-GAAP
measures are provided to enhance the user's overall understanding of
our operating performance and our prospects in the future.
Specifically, we believe the non-GAAP measures provide useful
information to both management and investors regarding financial and
business trends relating to our financial performance by excluding
certain costs and expenses that we believe are not indicative of our
core operating results. These non-GAAP measures are among budgeting
and planning tools that management uses for future forecasting. The
presentation of this additional information is not meant to be
considered in isolation or as a substitute for results prepared in
accordance with United States GAAP.
Stock-based compensation
----------------------------------------------------------------------
Redback has incurred stock-based compensation expense under SFAS 123R
for fiscal year 2006, and under APB 25 for earlier comparable periods
in its GAAP financial results. We exclude this item for the purpose
of calculating non-GAAP operating income, non-GAAP net income and
non-GAAP net income per share. The exclusion of stock-based
compensation from the non-GAAP measures is done to allow for a
consistent comparison of the Company's relative historical financial
performance, since the method for accounting for stock-based
compensation changed at the beginning of fiscal year 2006. The nature
of stock-based compensation expense also makes it very difficult to
estimate prospectively, since the expense will vary with changes in
the stock price and market conditions at the time of new grants,
varying valuation methodologies, subjective assumptions and different
award types, making the comparison of current results with forward
guidance potentially difficult for investors to interpret. The tax
effects of stock-based compensation expenses may also vary
significantly from period to period, without any change in underlying
performance, thereby obscuring the underlying profitability of
operations relative to prior periods (including prior periods
following the adoption of SFAS 123R).
Amortization of intangible assets
----------------------------------------------------------------------
Amortization of other intangible assets is excluded from the Company's
non-GAAP financial measures because it represents a non-cash expense
that has no effect on current or future period cash flows or
operations of the Company. The basis for the amortization comes as a
result of the Company's emergence from bankruptcy and the adoption of
fresh-start reporting in January 2004, a one-time non-recurring event
outside of the course of normal business operations. This isolated
event and its related financial reporting impact are not indicative
of our ongoing operational performance.
Amortization of fair value of warrants issued in connection with a
lease agreement
----------------------------------------------------------------------
Amortization of fair value of warrants issued in connection with a
lease agreement is excluded from the Company's non-GAAP financial
measures because it represents a non-cash expense that has no effect
on current or future period cash flows or operations of the Company.
As part of the Company's bankruptcy plan, the Company rejected all US
based operating leases and entered into new agreements effective
January 3, 2004. In connection with the lease of its corporate
headquarters, the Company issued warrants to the landlord, which were
recorded as a deferred charge and are being amortized over the life
of the original lease which originally expired on October 31, 2006.
This one-time non-recurring event and its related financial reporting
impact are not indicative of our ongoing operational performance.
Income Tax
----------------------------------------------------------------------
Amount represents primarily the federal and state income tax expense
from the utilization of pre-bankruptcy tax net operating losses that
was recorded as a reduction of goodwill for GAAP purposes, off set by
federal and state alternative minimum taxes used for non-GAAP
purposes.
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Redback Networks Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended Nine months ended
September 30, 2006 September 30, 2005
------------------ ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss before deemed
dividend and accretion on
preferred stock $ (6,589) $ (22,225)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 17,608 20,029
Stock-based compensation 16,746 3,025
Gain on sale of investment (619) --
Changes in assets and
liabilities:
Accounts receivable, net (2,843) 3,310
Inventories (1,997) (7,433)
Other assets 1,290 (2,113)
Accounts payable and accrued
liabilities 14,620 4,234
Deferred revenue 5,982 (1,016)
Other long-term liabilities (91) (267)
------------------ ------------------
Net cash provided by (used in)
operating activities 44,107 (2,456)
------------------ ------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property and
equipment (7,135) (7,080)
Proceeds from sale of equity
investments 619 --
------------------ ------------------
Net cash used in investing
activities (6,516) (7,080)
------------------ ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issuance of
stock and exercise of
warrants 12,030 7,663
Proceeds from bank borrowings -- 4,000
Principal payments on capital
lease obligations (479) (2,169)
Proceeds from issuance of
common stock upon offering
(net of issuance cost) 83,093 --
------------------ ------------------
Net cash provided by financing
activities 94,644 9,494
------------------ ------------------
Net increase (decrease) in cash
and cash equivalents 132,235 (42)
Cash and cash equivalents at
beginning of period 43,764 42,558
------------------ ------------------
Cash and Cash equivalents at
end of period $ 175,999 $ 42,516
================== ==================
*T