KING OF PRUSSIA, Pa., Aug. 28, 2002 (PRIMEZONE) -- Neoware Systems, Inc. (Nasdaq:NWRE), the leading supplier of award-winning software, services, and solutions for the Appliance Computing market, today reported sharply higher revenue and earnings for its fourth quarter and fiscal year ended June 30, 2002.
FINANCIAL HIGHLIGHTS
-- Revenues for the quarter ended June 30, 2002 increased 165% to
$14,081,225, from $5,321,251 in the prior year quarter.
-- Net income for the quarter ended June 30, 2002 increased 278% to
$1,703,021, or $0.13 per fully diluted share, excluding an income
tax benefit recorded during the quarter, compared to net income of
$451,052, or $0.04 per fully diluted share in the prior year
quarter.
-- During the quarter ended June 30, 2002, the Company recorded a net
income tax benefit of $1,346,728, or $0.10 per fully diluted
share, which reflects the reversal of a previously recorded
reserve against deferred income tax assets. This reversal is the
result of the Company's recent sustained history of operating
profitability and future prospects of continued profitability.
-- Including the income tax benefit, net income for the quarter ended
June 30, 2002 was $3,049,749 or $0.23 per fully diluted share.
-- Revenues for the year ended June 30, 2002 increased 94% to
$34,309,667, from $17,654,825 in the prior year.
-- Net income for the year ended June 30, 2002, excluding the income
tax benefit, was $3,278,320, or $0.28 per fully diluted share,
compared to a net loss of $(508,768), or $(0.05) per fully diluted
share in the prior year.
-- Including the income tax benefit, net income for the fiscal year
ended June 30, 2002 was $4,625,048, or $0.39 per fully diluted
share.
"Through our organic growth and carefully targeted acquisitions, we have positioned the Company as a clear leader in our market," stated Michael Kantrowitz, Neoware's President and CEO. "We are now beginning to demonstrate the opportunity we see, by delivering strong revenue growth and the scaling benefits of our software-powered business model."
Commenting further on the Company's growth, Mr. Kantrowitz noted, "Neoware has increased its market share significantly in the past year. We grew our business at three times the thin client market's rate to become the number two supplier of thin clients in the US in calendar 2001 according to International Data Corporation. Importantly, we achieved this gain even before our acquisition of the ThinSTAR product line and our alliance with IBM, both of which occurred in calendar 2002. IDC is predicting robust growth in the thin client appliance market over the next several years. We believe that we are well positioned to continue to grow significantly faster than our market."
"Appliance Computing is gaining increased acceptance because it is now supported by standard Microsoft operating systems, and because it saves customers money. These facts are driving the revenue increases we're delivering. Neoware is gaining market share with growing profitability, a strong balance sheet and no debt. The benefits of our business model are demonstrable in our performance, and we believe that Neoware is very well positioned to continue to deliver positive financial results," Mr. Kantrowitz noted.
ADDITIONAL FINANCIAL HIGHLIGHTS
-- Organic revenue grew significantly during the quarter. Excluding
revenue attributable to the IBM Alliance, sales of ThinSTAR
products, and revenue from NCD in Europe, revenues in Q4 2002 grew
by approximately 20% from the prior sequential quarter, and more
than 80% from the prior year quarter.
-- Operating results include depreciation and amortization of
$164,829 in Q4 2002, and $496,233 for fiscal 2002.
-- Total gross margin was 40% in Q4 2002 and 40% in the prior year
quarter.
-- Inventory on hand was $1,040,851, or 11 days at June 30, 2002,
compared to 13 days in the prior year quarter.
-- Days sales outstanding (DSOs) were 45 days at the end of Q4 2002,
based upon the timing of sales within the quarter, compared to 38
days in the prior year quarter. DSOs remained well within the
Company's goal of less than 60 days based on timing of sales
within the quarter.
-- Total operating expenses decreased to 28% of revenue for Q4 2002,
compared to 34% of revenue in the prior year quarter, reflecting
the scaling benefits of the Company's software-powered business
model.
-- Annualized revenue per employee increased 67% to $526,000 in Q4
2002 from $316,000 in the prior year quarter, even as employment
grew by 60%. During the year the Company significantly expanded
its sales, marketing and executive management ranks.
-- Research and Development expenses were up 23% in Q4 2002 from the
prior year quarter, reflecting the Company's commitment to
establish and maintain technical leadership in its markets.
-- General and Administrative expenses decreased to 8.6% of revenues
in Q4 2002 from 10.3% in the prior year quarter as a result of
increased revenues and the Company's focus on cost containment.
-- Cash, cash equivalents and marketable securities grew to
approximately $17.2 million at the end of Q4 2002. During the
quarter, the Company raised approximately $11 million, net of
expenses, as a result of a private placement of its common stock
primarily to institutional investors.
CUSTOMER WINS
-- During the quarter, the Company sold its products across a broad
range of industry segments including retail, healthcare,
manufacturing, transportation, government, and education.
-- Neoware added 263 new customers during Q4, up significantly from
169 in the prior sequential quarter, and representing a new
record. The Company accomplished this increase even though sales
generated through distributors increased, where new end-user
customers are not typically identified.
-- Specific customer announcements during the quarter included Ateb,
Raymour and Flanagan, Ninth Judicial Circuit, Sartomer, Lockheed
Martin, and Keystone Automotive.
-- Even with record new customer acquisition, revenue from existing
customers accounted for 88% of total revenue for the quarter,
demonstrating on-going revenue persistence and Neoware's continued
high level of customer satisfaction and repeat business.
IBM ALLIANCE
-- In January 2002, Neoware announced an alliance with IBM under
which it has become the preferred provider of thin client
appliances and software to IBM and its customers.
-- Customer response to the Neoware-IBM Alliance has been very
positive, and, as a result, Neoware and IBM are engaged together
in significant new opportunities for the sale of thin client
appliance solutions throughout the Americas, Europe, and Asia.
Since forming the alliance, Neoware and IBM have made joint
presentations to hundreds of customers.
-- Revenue for Q4 2002 included approximately $2 million attributable
to the IBM Alliance, significantly more than the Company
originally projected.
"Neoware intends to continue to distinguish itself from its hardware competitors by providing a complete range of solutions including software, appliances, and services," Mr. Kantrowitz commented. "We believe that our broad product offering provides more value to our customers, and will continue to drive our growth."
"Looking forward, we are confident that we'll deliver continued, significant increases in revenues and gains in market share over the coming year as a result of robust growth in our markets, our superior business model, and our strong industry alliances. As our top line grows, we expect to see additional scaling benefits of our operating model, further reducing our operating expenses as a percentage of revenue. Neoware has the financial strength and resources to continue to grow this business organically, as well as through carefully selected acquisitions," Mr. Kantrowitz concluded.
About Neoware
Neoware provides software, services, and solutions to enable Appliance Computing, a new Internet-based computing architecture targeted at business customers that is designed to be simpler and easier than traditional PC-based computing. Neoware's software and management tools power and manage a new generation of smart computing appliances that utilize the benefits of open, industry-standard technologies to create new alternatives to personal computers used in business and a wide variety of proprietary business devices.
Neoware's products are designed to run local applications for specific vertical markets, plus allow access across a network to multi-user Windows servers, Linux servers, mainframes, minicomputers, and the Internet. Computing appliances that run and are managed by Neoware's software offer the cost benefits of industry-standard hardware and software, easier installation, and have lower up-front and administrative costs than proprietary or PC-based alternatives.
More information about Neoware can be found on the Web at www.neoware.com or via email at invest@neoware.com. 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: the anticipated robust growth in the thin client appliance market over the next several years; our expectation that we will continue to grow significantly faster than the thin client market; increased acceptance of Appliance Computing by customers; our commitment to establish and maintain technical leadership in our markets; our complete range of solutions including software, appliances, and services that distinguishes us from our hardware competitors; our belief that our broad product offering provides more value to our customers and will continue to drive our growth; our expectation of continued, significant increases in revenues over the coming year, continued gains in market share due to our business model and our industry alliances, additional scaling benefits of our operating model and continued reduction of our operating expenses as a percentage of revenue and growth in our profitability; our alliance with IBM and the significant new sales opportunities through the alliance; our position as the leading supplier of software, products, services and solutions for the Appliance Computing market; the benefits of our business model; future acquisitions; and our competitive advantage. These forward-looking statements involve risks and uncertainties. Factors that could cause actual results to differ materially from those predicted in any such forward-looking statement include our ability to continue to lower our costs, our timely development and customers' acceptance of our Appliance Computing products, including acceptance by IBM and NCD customers, pricing pressures, rapid technological changes in the industry, growth of the Appliance Computing market, increased competition, our ability to attract and retain qualified personnel, our ability to identify and successfully consummate future acquisitions; adverse changes in customer order patterns, 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 report on Form 10-K for its fiscal year ended June 30, 2001.
Neoware is a registered 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
ASSETS June 30, 2002 June 30, 2001
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 17,031,422 $ 11,712,535
Marketable securities 183,333 366,667
Accounts receivable, net 9,520,558 3,502,013
Inventories 1,040,851 458,736
Deferred income taxes 1,394,864 --
Prepaid expenses and other 551,598 369,529
Notes receivable -- 26,072
------------ ------------
Total current assets 29,722,626 16,435,552
Property and equipment, net 622,235 199,397
Goodwill and other intangibles 11,568,940 2,024,453
Deferred income taxes 292,863 --
Notes receivable 263,732 52,193
Capitalized and purchased
software, net 47,779 77,247
------------ ------------
$ 42,518,175 $ 18,788,842
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
$ 3,111,164 $ 935,943
Accrued expenses 2,136,776 1,473,718
Capital lease obligations 63,037 --
Deferred revenue 582,290 289,278
------------ ------------
Total current liabilities 5,893,267 2,698,939
------------ ------------
Capital lease obligations, non-current
portion 204,131 --
------------ ------------
Deferred income taxes 119,215 --
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock -- --
Common stock 12,936 10,280
Additional paid-in capital 40,291,861 24,524,567
Treasury stock (100,000) (100,000)
Accumulated other comprehensive
income (loss) (116,672) 66,667
Retained earnings (deficit) (3,786,563) (8,411,611)
------------ ------------
Total stockholders' equity 36,301,562 16,089,903
------------ ------------
$ 42,518,175 $ 18,788,842
============ ============
NEOWARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Twelve Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net revenues $14,081,225 $ 5,321,251 $34,309,667 $17,654,825
Cost of revenues 8,482,298 3,212,344 20,345,034 11,692,775
----------- ----------- ----------- -----------
Gross profit 5,598,927 2,108,907 13,964,633 5,962,050
----------- ----------- ----------- -----------
Sales and
marketing 2,308,322 842,032 6,381,124 3,058,008
Research and
development 413,938 336,543 1,441,359 955,386
General and
administrative 1,213,945 547,873 3,159,875 2,171,280
Acquisition
costs -- 84,801 -- 245,839
----------- ----------- ----------- -----------
Operating
expenses 3,936,205 1,811,249 10,982,358 6,430,513
----------- ----------- ----------- -----------
Operating
income (loss) 1,662,722 297,658 2,982,275 (468,463)
Loss on
investment -- -- -- (812,000)
Interest income,
net 40,299 153,394 296,045 771,695
----------- ----------- ----------- -----------
Income (loss)
before income
tax benefit 1,703,021 451,052 3,278,320 (508,768)
Income tax
benefit 1,346,728 -- 1,346,728 --
----------- ----------- ----------- -----------
Net income
(loss) $ 3,049,749 $ 451,052 $ 4,625,048 $ (508,768)
=========== =========== =========== ===========
Basic income
(loss) per
share $ 0.26 $ 0.04 $ 0.42 $ (0.05)
=========== =========== =========== ===========
Diluted income
(loss) per
share $ 0.23 $ 0.04 $ 0.39 $ (0.05)
=========== =========== =========== ===========
Weighted average
number of
shares used
in basic
earnings per
share
computation 11,916,044 10,177,703 10,904,565 10,226,316
=========== =========== =========== ===========
Weighted average
number of
shares used
in diluted
earnings per
share
computation 13,417,597 10,561,231 11,851,327 10,226,316
=========== =========== =========== ===========
NEOWARE SYSTEMS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Year
Ended Ended
June 30, 2002 June 30, 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,049,749 $ 4,625,048
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities-
Depreciation and amortization 164,829 496,233
Deferred income tax benefit (1,347,481) (1,347,481)
Changes in operating assets and
liabilities -
(Increase) decrease
in:
Accounts receivable (3,398,913) (5,670,353)
Inventories (450,645) (578,166)
Prepaid expenses and other (209,097) (57,119)
Increase (decrease) in:
Accounts payable 415,546 1,050,851
Accrued expenses 493,324 498,114
Deferred revenue 236,123 139,212
------------ ------------
Net cash provided by (used in)
operating activities (1,046,565) (843,661)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Activ-e Solutions (25,663) (220,649)
Purchase of NCD ThinStar (29,178) (4,172,414)
Purchase of intangible assets (14,950) (64,573)
Purchases of property and
equipment, net (39,580) (128,324)
------------ ------------
Net cash provided by
(used in) investing activities (109,371) (4,585,960)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of bank debt -- (388,213)
Repayments of capital leases (15,019) (33,317)
Private placement 11,192,716 11,192,716
Exercise of stock options 27,514 162,789
Loan to officer (263,732) (263,732)
Repayments of officer loans 47,621 78,265
------------ ------------
Net cash provided by (used in)
financing activities 10,989,100 10,748,508
------------ ------------
INCREASE IN CASH AND CASH
EQUIVALENTS 9,833,164 5,318,887
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 7,198,258 11,712,535
============ ============
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 17,031,422 $ 17,031,422
============ ============