KING OF PRUSSIA, Pa., April 24, 2002 (PRIMEZONE) -- Neoware Systems (Nasdaq:NWRE), the leading supplier of award-winning software, services, and solutions for the Appliance Computing market, today reported significantly higher revenue and profitable operations for its third fiscal quarter ended March 31, 2002.
Driven by growing demand for software-powered Appliance Computing solutions by business customers, revenues for the quarter ended March 31, 2002 grew to $8,368,580, an increase of 70% from $4,911,167 for the prior year quarter. Net income for the quarter ended March 31, 2002 was $705,058, or $0.06 per fully diluted share, compared to a net loss of $495,748, or $(0.05) per share, in the prior year period, which included a one-time impairment charge of $812,000. For the current quarter, fully diluted shares outstanding increased to 12,509,099 from 10,884,693 in the December quarter as a result of newly issued shares to IBM and ACTIV-e Solutions, as well as additional in-the-money stock options resulting from the Company's higher stock price.
For the nine months ended March 31, 2002 revenues were $20,228,442, an increase of 64% from $12,333,573 in the prior year. Net income for the nine months was $1,575,299, or $0.14 per fully diluted share, compared to a net loss of $(959,820) or $(0.09) per share in the prior year period.
"Neoware continues to demonstrate the benefits of our software-powered business model, as well as the results of our acquisition strategy," stated Michael Kantrowitz, Neoware's President and CEO. "Even better, we're reporting these positive results with only small contributions from our alliance with IBM, which we announced in January, and from our acquisition of the NCD ThinSTAR product line which we closed in March. We expect these two developments to add considerably to our future results."
Commenting on the Company's recent developments, Mr. Kantrowitz noted, "Neoware's organic revenues, when combined with the revenues from the businesses of our recent acquisitions and alliances, now represent nearly 30% of the thin client appliance market -- a significant increase for our Company. Our alliance with IBM is beginning to deliver results as we have received initial customer orders and we expect to begin ramping revenues in the current quarter ending June 30, 2002. Our alliance with NCD and our acquisition of the ThinSTAR product line, which we completed at the end of March, places us in an even stronger position to grow our business."
"Neoware is growing faster than our competitors with greater profitability and a strong balance sheet with no debt. The benefits of our business model are clear, and Neoware is very well positioned to continue to deliver positive financial results," Mr. Kantrowitz noted.
FINANCIAL HIGHLIGHTS
-- Revenues for the third quarter increased 70% over the prior year
quarter to $8,368,580.
-- Net income for the quarter of $705,058 was $0.06 per fully
diluted share and 8.4% of revenue.
-- Total gross margin was 40% for the quarter, up from 34% in the
prior year quarter. Inventory on hand was $586,257, or 10 days at
quarter end, compared to $373,030, or 9 days in the prior quarter
as the Company increased its inventories to respond to IBM's
customers, as previously reported.
-- Research and Development expenses were up 37% 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 9.1% of revenues
from 11.7% in the prior year as a result of increased revenues
and the Company's focus on cost containment.
-- Cash, cash equivalents and marketable securities were
approximately $7.5 million at quarter end after the cash payment
to NCD in connection with the ThinSTAR acquisition.
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 169 new customers during Q3, up from 131 in the
prior quarter, representing a new record for the Company.
-- Even with record new customer acquisition, revenue from existing
customers accounted for 88% of total revenue for the quarter,
demonstrating Neoware's continued high level of customer
satisfaction and repeat business.
NEOWARE TECHNOLOGY GROUP
-- In December 2001, Neoware acquired ACTIV-e Solutions and formed a
new subsidiary, Neoware Technology Group, Inc., to provide
integration services to its customers. With this acquisition,
Neoware is now able to provide a complete range of products,
services, software, and solutions to enable enterprise customers
to embrace Appliance Computing.
IBM ALLIANCE
-- On January 8, 2002, Neoware announced an alliance with IBM under
which it has become the preferred provider of thin client
appliances to IBM and its customers.
-- Customer response to Neoware and IBM presentations 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.
-- Together, Neoware and IBM have made joint presentations to more
than 100 customers since forming the alliance.
-- Neoware has received initial orders from IBM and its customers,
and expects to begin ramping revenues related to the alliance in
the quarter ending June 30, 2002.
NCD ALLIANCE AND THINSTAR ACQUISITION
-- On March 26, 2002 Neoware acquired the ThinSTAR product line and
announced an alliance with NCD under which the two companies will
collaborate to grow the thin client appliance market.
-- NCD generated approximately $17.8 million in revenue for the
ThinSTAR product line in 2001, and approximately $3.8 million in
Q4 2001.
"Neoware will continue to distinguish itself from its hardware competitors by providing a complete range of solutions including software, appliances, and services," Mr. Kantrowitz commented. "Our new alliance with IBM is beginning to bear fruit, with significant sales activities and positive feedback from IBM customers about Neoware's capabilities, migration plan, and product strategy. While individual large orders can affect our results in any given quarter, our acquisitions and alliances, combined with strong growth, both organically and in our markets, will allow us to continue to deliver revenue and earnings growth in coming periods."
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 increased revenues from our services subsidiary and our alliance with IBM, our position as the leading supplier of software, products, services and solutions for the Appliance Computing market, the rapid growth of our business, revenues and profitability as a result of our business model and our acquisition strategy and alliances, the competitive advantage of our business model, our proprietary software and our technology, our focus on cost containment, the growth of the Appliance Computing market, the increasing demand for our products, continued benefits of our business model to our stockholders, employees and customers due to our proven software-powered business model 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 Neoware's ability to lower its costs, Neoware's timely development and customers' acceptance of Neoware's 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, 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
(Unaudited)
ASSETS March 31, 2002 June 30, 2001
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 7,198,258 $ 11,712,535
Marketable securities 333,333 366,667
Accounts receivable, net 6,121,645 3,502,013
Inventories 586,257 458,736
Prepaid expenses and other 346,444 369,529
Notes receivable 26,072 26,072
------------ ------------
Total current assets 14,612,009 16,435,552
Property and equipment, net 625,355 199,397
Goodwill and other intangibles 11,636,422 2,024,453
Notes receivable 21,549 52,193
Capitalized and purchased
software, net 55,146 77,247
------------ ------------
$ 26,950,481 $ 18,788,842
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
$ 2,695,618 $ 935,943
Accrued expenses 1,643,452 1,473,718
Capital lease obligations 61,335 --
Deferred revenue 368,667 289,278
------------ ------------
Total current liabilities 4,769,072 2,698,939
------------ ------------
Capital lease obligations,
non-current portion 220,851 --
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock -- --
Common stock 11,327 10,280
Additional paid-in capital 28,856,626 24,524,567
Treasury stock (100,000) (100,000)
Accumulated other
comprehensive income 28,917 66,667
Retained earnings (deficit) (6,836,312) (8,411,611)
------------ ------------
Total stockholders' equity 21,960,558 16,089,903
------------ ------------
$ 26,950,481 $ 18,788,842
============ ============
NEOWARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
------------------------- -------------------------
March 31, March 31, March 31, March 31,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net revenues $ 8,368,580 $ 4,911,167 $20,228,442 $12,333,573
Cost of
revenues 5,061,893 3,229,790 11,862,736 8,480,431
----------- ----------- ----------- -----------
Gross profit 3,306,687 1,681,377 8,365,706 3,853,142
----------- ----------- ----------- -----------
Sales and
marketing 1,547,448 740,200 4,072,802 2,215,976
Research and
development 352,570 258,293 1,027,421 618,843
General and
administrative 761,656 574,561 1,945,930 1,623,406
Acquisition
costs -- -- -- 161,038
----------- ----------- ----------- -----------
Operating
expenses 2,661,674 1,573,054 7,046,153 4,619,263
----------- ----------- ----------- -----------
Operating
income
(loss) 645,013 108,323 1,319,553 (766,121)
Impairment
charge -- (812,000) -- (812,000)
Interest
income,
net 60,045 207,929 255,746 618,301
----------- ----------- ----------- -----------
Net income
(loss) $ 705,058 $ (495,748) $ 1,575,299 $ (959,820)
=========== =========== =========== ===========
Basic income
(loss) per
share $ 0.06 $ (0.05) $ 0.15 $ (0.09)
=========== =========== =========== ===========
Diluted
income
(loss) per
share $ 0.06 $ (0.05) $ 0.14 $ (0.09)
=========== =========== =========== ===========
Weighted
average
number of
shares used
in basic
earnings
per share
computation 11,175,240 10,176,060 10,573,863 10,242,657
=========== =========== =========== ===========
Weighted
average
number of
shares
used in
diluted
earnings per
share
computation 12,509,099 10,176,060 11,326,706 10,242,657
=========== =========== =========== ===========