CANTON, Mass., July 28, 2011 /PRNewswire/ -- NEI (Nasdaq:NEI - News), a leading provider of server-based application platforms, deployment solutions and lifecycle support services for software technology developers and OEMs worldwide, today reported financial results for its third fiscal quarter, the period ended June 30, 2011.
Third Quarter Financial Performance
•Net revenues were $66.1 million, an increase of 7% compared to $61.6 million for the third fiscal quarter last year and a 2% sequential increase compared to the $65.0 million reported for the second fiscal quarter. The results exceeded the top end of the guidance of $61 to $66 million.
•Gross margin was 11.8 percent of net revenues, better than the guidance of 10.5 to 11.0 percent and compared to 11.0 percent for the third fiscal quarter of the prior year.
•Operating expenses were $6.1 million, including $183,000 of stock-based compensation expense and $332,000 of amortization expense, and within the guidance range of $5.9 million to $6.4 million. Operating expenses compared to $6.1 million in the year-ago third quarter, which included $205,000 of stock-based compensation expense and $389,000 of amortization expense.
•Net income on a GAAP basis was $1.9 million, or $0.04 per share, which included $214,000 of stock-based compensation expense and $332,000 of amortization expense. The results were better than guidance of $400,000 to $900,000 and compared to net income of $672,000, or $0.01 per share, which included $243,000 of stock-based compensation expense and $389,000 of amortization expense in the same period a year ago.
•Non-GAAP net income, which excludes stock-based compensation and amortization expenses, was $2.4 million, or $0.06 per share, better than the expected range of non-GAAP profit of $1.0 million to $1.5 million. The non-GAAP net income compared to non-GAAP net income of $1.2 million, or $0.03 per share in the third fiscal quarter of 2010.
•EMC represented 63% of net revenues, an increase from the 59% of net revenues reported in the second fiscal quarter. A portion of the increase is due to EMC's acquisition of NetWitness, an NEI customer, during the third fiscal quarter. Excluding NetWitness, EMC would have represented 61% of net revenues.
Greg Shortell, President and Chief Executive Officer of NEI, commented, "We continued to execute our business plan during the quarter, as evidenced in our revenues exceeding the top end of our guidance range, keeping our operating expenses in check, with higher gross margins and our seventh consecutive profitable quarter. We booked the initial revenue from our recently announced win at Mavenir Systems and won new appliance business for Symantec, a leading global security, backup and storage management software provider. These two wins are consistent with our strategy to win large, run-rate accounts and demonstrate that we are making steady progress in our business development efforts. This was the third consecutive quarter in which we improved our bottom line and we're pleased to report a record quarterly profit. "
For the nine month period ended June 30, 2011, net revenues were $202.8 million, compared to $160.7 million for the same period in 2010, an increase of 26 percent. Gross margin was $22.9 million, or 11.3 percent of net revenues, compared with gross margin of $19.3 million, or 12.0 percent of net revenues, for the same period last year. Total operating expenses were $18.2 million, or 9.0 percent of net revenues, compared with $18.2 million last year, or 11.3 percent of net revenues in the same period last year. On a GAAP basis, the Company reported net income of $4.7 million, or $0.11 per share, compared with net income of $1.1 million, or $0.03 per share, in the same period last year. The Company's non-GAAP net income, which excludes stock-based compensation and amortization expenses, was $6.4 million compared to non-GAAP net income of $3.0 million for the same period last year.
Balance Sheet
NEI finished the quarter with $15.0 million in cash and cash equivalents and $55.6 million in working capital. Accounts receivable increased to $41.9 million and inventory levels decreased to $22.6 million compared to $38.8 million and $26.5 million, respectively, as of March 31, 2011. NEI also has a $10 million bank credit facility that it has yet to utilize.
Business Outlook
NEI currently anticipates the following results for its fiscal fourth quarter ending September 30, 2011, based on current forecasts from certain customers and historical trends.
•Net revenues in the range of $63 million to $68 million.
•Gross margin in the range of 11.0 percent to 11.5 percent of net revenues.
•Operating expenses between $5.9 million and $6.4 million, including an estimated $185,000 of stock-based compensation expense and amortization expense of $332,000.
•Net income on a GAAP basis in the range of $1.4 million to $1.9 million.
•Net income on a non-GAAP basis in the range of $1.9 million to $2.4 million.
We are projecting that our performance in the fourth fiscal quarter will be similar to the financial results achieved in our third fiscal quarter," stated Doug Bryant, Chief Financial Officer. "This guidance continues to be driven by forecasts from our customers and reflects an expected increase in revenues from our telecommunications customers that is projected to offset the impact of EMC's dual-sourcing decision that we previously announced."