EX-99.1 3 dex991.txt PRESS RELEASE EXHIBIT 99.1 Contact: Contact: John Murzycki Ian Bailey Network Engines, Inc. FD Morgen-Walke (781) 332-1914 (212) 850-5600 john.murzycki@networkengines.com ibailey@fdmw.com -------------------------------- ---------------- Network Engines Reports Improved Results for its Second Quarter Sixth Consecutive Quarter of Revenue Growth Canton, MA., April 24, 2003 - Network Engines (Nasdaq:NENG), a leading development, manufacturing and distribution partner for storage and security software and equipment providers, today reported a significant improvement in financial results for its second quarter ended March 31, 2003. This is the first full quarter of consolidated financial results that include the acquisition of TidalWire Inc., which was completed on December 27, 2002. These results are reported in accordance with Generally Accepted Accounting Principles ("GAAP"). Second quarter fiscal 2003 financial highlights include: o An increase to $19.4 million in net revenues, compared to $6.0 million in the prior quarter. TidalWire operations accounted for $10.2 million of this net revenue total. o Gross margin of 20.9 percent, compared to 22.6 percent in the previous quarter. The margin reflects a full quarter of distribution revenues, which have lower margins than appliance revenues. o A net loss of $684,000, or a loss of $0.02 per share, compared to a net loss of $2.2 million, or a loss of $0.07 per share, in the quarter ended December 31, 2002. The net loss for the prior quarter included $914,000 of restructuring and other charges for unused leased facilities. o Cash and cash equivalents totaled $38.8 million at the close of the quarter. For the quarter ended March 31, 2003, Network Engines reported net revenues of $19.4 million, a significant increase from $3.0 million reported in the second quarter of fiscal 2002. This increase was due to both the consolidation of TidalWire revenues for the first full quarter and the growth in Network Engines' server appliance business. Net loss was $684,000, or a loss of $0.02 per share, a significant improvement compared to a net loss of $2.9 million, or a loss of $0.09 per share, in the fiscal 2002 second quarter. Revenue for the second quarter of fiscal 2003 consisted of $9.2 million from server appliance sales to Independent Software Vendors ("ISVs") and Original Equipment Manufacturer ("OEM") customers and $10.2 million from distribution operations. Sales to a single customer were 42 percent of total net revenues in the second quarter, compared to 82 percent of total net revenues in the quarter ended December 31, 2002. "Our results this quarter were particularly encouraging given the time and effort expended toward integrating TidalWire and Network Engines operations," said John Curtis, president and CEO of Network Engines. "Our new distribution capabilities have significantly enhanced our ability to provide a full range of services to our partners. We have diversified our customer base and revenue sources while continuing to grow our strong relationships with leading Independent Software Vendors, OEM customers and value-added resellers." During the quarter ended December 31, 2002, Network Engines completed its acquisition of TidalWire, a specialist distributor of storage networking products serving a customer base of over 500 systems integrators, value-added resellers, service and solution providers. This distribution capability allows Network Engines to provide its appliance partners with a unique combination of services, including engineering, manufacturing, fulfillment, distribution, and post sales support. "We are pleased that results for the quarter exceeded our expectations," said Doug Bryant, vice president of finance and administration and Chief Financial Officer. "The integration of the TidalWire operations is proceeding well and we are achieving the synergies that we expected when we announced the acquisition." Company Offers Financial Guidance Based on current forecasts, the Company anticipates net revenues in the third fiscal quarter ending June 30, 2003 will be between $22 million and $24 million. The Company expects net revenues from server appliance sales to be between $11.5 million and $12.5 million and net revenues from distribution operations to be between $10.5 million and $11.5 million. The Company anticipates third quarter gross margins will be between 19.5 percent and 21.5 percent, depending on sales volumes and the mix of business during the quarter. Operating expenses in the third quarter are expected to increase to between $5 million and $5.3 million. On a GAAP basis, the Company expects a net loss of between $200,000 and $500,000, or approximately $0.01 per share for the third quarter. This projected net loss includes approximately $254,000 for the amortization of intangible assets related to the TidalWire acquisition and $245,000 of stock compensation expense. The cash position at the end of the third quarter is expected to be between $33 million and $35 million. This projected decrease in cash is primarily due to increased investments in working capital due to the growth of the business. Conference Call Network Engines will host a conference call today at 5:00 p.m. ET to discuss the fiscal 2003 second quarter results. The conference call will be available live at the Company's website at www.networkengines.com and will be archived on the site. About Network Engines Network Engines (NASDAQ: NENG) is a leading development, manufacturing and distribution partner for storage and security software and equipment providers worldwide. The company works with its software partners to develop, manufacture, and distribute server appliances for mission-critical storage and security networking applications. Network Engines distribution operations offers a full compliment of appliances, complimentary products and components to a growing customer base of value added resellers and systems integrators who provide storage and security networking solutions to the Enterprise. Headquartered in Canton, Massachusetts, Network Engines was founded in 1997. For additional information on the Company's products and services visit www.networkengines.com. ### Safe Harbor and Forward-Looking Statements Statements in this press release regarding Network Engines' future financial performance including statements regarding future revenue, gross margins, operating expenses, net loss and cash position, and any other statements about Network Engines' management's future expectations, beliefs, goals, plans or prospects constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company's actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including those factors contained in the Company's most recent Annual Report on Form 10-K for the year ended September 30, 2002 and most recent Form 10-Q for the quarter ended December 31, 2002 under the section "Factors That May Affect Future Operating Results" as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. Forward-looking statements include statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "should", "will", and "would" or similar words. The Company assumes no obligations to update the information included in this press release. Network Engines, the Network Engines logo, TidalWire, the TidalWire logo, ApplianceEngine 1000, ApplianceEngine 3000, ApplianceEngine 5000, are trademarks of Network Engines, Inc. All other trademarks are the property of their respective holders. Network Engines, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited)
Three Months Ended Six Months Ended ----------------------------------------------- ---------------------------------- March 31, December 31, March 31, March 31, 2003 2002 2002 2003 2002 --------------- -------------- -------------- ---------------- ----------------- Net revenues $19,427 $ 5,988 $ 3,034 $ 25,415 $ 5,135 Cost of revenues 15,366 4,636 2,767 20,002 4,912 --------------- -------------- -------------- ---------------- ----------------- Gross profit 4,061 1,352 267 5,413 223 Operating expenses: Research and development 917 794 1,258 1,711 2,803 Selling and marketing 1,564 875 790 2,439 1,972 General and administrative 1,899 983 1,469 2,882 2,646 Stock compensation 279 192 168 471 3,835 Amortization of intangible assets 254 - - 254 - Restructuring and other charges (30) 914 - 884 - --------------- -------------- -------------- ---------------- ----------------- Total operating expenses 4,883 3,758 3,685 8,641 11,256 Loss from operations (822) (2,406) (3,418) (3,228) (11,033) Other income 138 227 522 365 946 --------------- -------------- -------------- ---------------- ----------------- Net loss $ (684) $(2,179) $(2,896) $(2,863) $(10,087) =============== ============== ============== ================ ================= Net loss per share - basic and diluted $ (0.02) $ (0.07) $ (0.09) $ (0.09) $ (0.30) =============== ============== ============== ================ ================= Shares used in computing basic and diluted net loss per share 33,524 30,590 32,847 32,050 33,180
Network Engines, Inc. Condensed Consolidated Balance Sheets (in thousands)
March 31, September 30, 2003 2002 (unaudited) -------------- --------------- ASSETS Current assets: Cash and cash equivalents $ 38,846 $ 46,552 Short-term investments - 8,546 Restricted cash 47 1,098 Accounts receivable, net 12,707 2,729 Inventories 5,876 1,956 Other current assets 1,077 1,065 -------------- --------------- Total current assets 58,553 61,946 Property and equipment, net 2,038 2,236 Goodwill 7,753 - Intangible Assets 4,817 - Other assets 54 28 -------------- --------------- Total assets $ 73,215 $ 64,210 ============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,945 $ 1,474 Accrued liabilities 2,348 1,468 Current portion of accrued restructuring and other charges 569 355 Deferred revenue 314 23 Current portion of capital leases and notes payable 3 14 -------------- --------------- Total current liabilities 11,179 3,334 Long-term portion of accrued restructuring and other charges 434 - Stockholders' equity: Common stock 363 357 Treasury stock (2,838) (4,707) Additional paid-in capital 175,431 174,252 Deferred stock compensation (928) (1,185) Stockholder notes receivable - (281) Accumulated other comprehensive income - 3 Accumulated deficit (110,426) (107,563) -------------- --------------- Total stockholders' equity 61,602 60,876 -------------- --------------- Total liabilities and stockholders' equity $ 73,215 $ 64,210 ============== ===============