Procera Networks Announces 2012 Fourth Quarter and Full Year Results

Procera Networks Announces 2012 Fourth Quarter and Full Year Results 
FREMONT, CA -- (Marketwire) -- 02/28/13 --   Procera Networks, Inc.
(NASDAQ: PKT), the global intelligent policy enforcement company,
today reported financial results for its fourth quarter and year
ended December 31, 2012. 
Fourth Quarter 2012 Highlights 


 
--  Revenue of $16.6 million, up 6% from Q4 2011; record bookings at $22.4
    million, up 124% from Q4 2011
    --  Won four new Tier 1 customers
    --  New Tier 1 wins included U.S. fixed line service provider, a
        Middle Eastern mobile service provider, and an Eastern European
        cable provider
    --  Added 17 new service provider customers, including 7 mobile
        operators
    --  Two follow-on orders from two large Tier 1 APAC mobile operators
    --  Two new orders for PL20K in Europe representing one new and one
        existing customer
    --  Mobile customers contributed 38% of product revenue
    --  Support revenue of $3.5 million, up 60% from Q4 2011
    --  Approximately 40% of bookings came from new customers
    --  19 direct Tier 1 trials ongoing or planned over the next 60 days
--  Gross margin of 65%, up from 56% in Q4 2011
--  GAAP net income of $1.2 million, compared to $1.8 million in Q4 2011
--  Non-GAAP net income of $2.4 million, compared to $2.3 million in Q4
    2011

  
Full Year 2012 Highlights 


 
--  Record revenue of $59.6 million, up 34% from 2011; record bookings of
    $67.6 million
    --  Added 13 new Tier 1 customers across all regions, including 7 Tier
        1 mobile operators
    --  Added more than 50 new service provider customers, including more
        than 20 new mobile operators
    --  Mobile customers contributed 30% of product revenue, up from 4% in
        2011
    --  Selected by three of the top five US fixed line operators
    --  Support revenue of $11.9 million, up 71% from 2011
    --  Approximately 49% of bookings came from new customers
    --  Gross margin of 67%, up from 59% for 2011
    --  GAAP net income of $5.3 million, compared to $3.8 million in 2011
    --  Non-GAAP net income of $9.4 million, compared to $5.5 million in
        2011
    --  Generated $7.2 million of cash from operations, up from $4.6
        million in 2011
    --  Cash and short-term investments of $132 million at year end; no
        debt

  
"The market traction for our solutions is growing as we continue to win
new business across all customer segments and geographies, and we
believe we have established industry leadership, particularly within
the mobile segment and among Tier 1 service providers," said James
Brear, President and CEO of Procera Networks. "Our record fourth
quarter bookings include important wins with Tier 1 service providers
and the magnitude of our total bookings underscores our leadership
and the competitiveness of our products. We continue to build on our
product technology leadership with the proven industry leading
performance and scalability of our solutions, including our high
performance PL20K and the recently introduced ContentLogic
intelligence solution, which offer unique value propositions that
further distinguish Procera from the competition in our markets." 
Fourth Quarter and 2012 Financial Results
 Revenue for the fourth
quarter of 2012 was $16.6 million, up 6% from revenue of $15.6
million in the fourth quarter of 2011. Revenue for 2012 was $59.6
million, up 34% from revenue of $44.4 million in 2011.  
Net income for the fourth quarter of 2012 was $1.2 million, or $0.06
per diluted share, compared to net income of $1.8 million, or $0.12
per diluted share, for the fourth quarter of 2011. Net income for
2012 was $5.3 million, or $0.29 per diluted share, up 42% from net
income of $3.8 million, or $0.28 per diluted share, for 2011. 
Non-GAAP net income for the fourth quarter of 2012 was $2.4 million,
or $0.12 per diluted share, compared to non-GAAP net income of $2.3
million, or $0.15 per diluted share, for the fourth quarter of 2011.
Non-GAAP net income for 2012 was $9.4 million, or $0.51 per diluted
share, compared to a non-GAAP net income of $5.5 million, or $0.41
per diluted share, for 2011. For an explanation of non-GAAP financial
measures used in this release, and reconciliation to comparable GAAP
measures, please refer to the "Use of Non-GAAP Financial Information"
below. 
Financial Guidance
 Procera is providing guidance of annual revenue
growth in the range of 25% to 30% for 2013. We expect to gain market
share in 2013 and anticipate that most of our revenue growth will
occur in the second half of 2013. Our 2013 operating expenses are
expected to increase over 2012, beginning in the first quarter of
2013. Because higher operating expenses will precede our anticipated
second half revenue growth, we may incur operating losses in the
first half of 2013 and expect operating profits in the second half of
2013, on a non-GAAP basis. 
The guidance set forth above is an estimate only and actual
performance could differ. The Company's financial results
historically have been volatile, and a number of uncertainties and
other factors may cause the Company's prior results, performance or
achievements to be materially different from future results.  
Conference Call Information
 Procera Networks, Inc. will host a
conference call at 8:30 a.m. Eastern Time today, February 28, 2013,
to discuss its financial results for its fourth quarter and year
ended December 31, 2012. Interested parties can access the live call
by dialing 1-877-941-1427 or 1-480-629-9664 (International) and
request the "Procera" call. A replay of the call will be available
approximately one hour following the end of the call through 11:59
p.m. ET on Thursday, March 7, 2013, by dialing 800-406-7325 and
entering the replay code of 4588176 #. To access the replay from
international locations, dial 303-590-3030 using the same passcode.
An archive of the conference call will be available on the Quarterly
Results and Events section of the Procera Networks' Investor
Relations Web site at www.proceranetworks.com/investors. 
Cautionary Note Regarding Forward-Looking Statements
 This press
release contains forward-looking statements related to Procera
Networks, Inc., including statements about Procera's expectations for
revenue growth, operating expenses and operating results for 2013,
including the expected timing of revenue growth and expenses, the
impact of the company's acquisition of Vineyard Networks Inc., the
market opportunity and an increase in the Company's market share, its
industry and technology leadership, its ability to grow in new
geographic markets, its new product offerings and its ability to
successfully perform in trials and close new business from projected
sales opportunities. Statements in this release that are not
historical or current facts are forward-looking statements. All
forward-looking statements in this release are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and
other factors that may cause the company's actual results,
performance or achievements to be materially different from any
future results, performances or achievements expressed or implied by
the forward-looking statements. These risks and uncertainties
include, without limitation, risks and uncertainties related to the
acceptance and adoption of Procera's products; the company's ability
to service and upgrade its products; lengthy sales cycles and lab and
field trial delays by service providers; its dependence on a limited
product line; its dependence on key employees; its ability to compete
in our industry with companies that are significantly larger and have
greater resources; its ability to protect its intellectual property
rights in a global market; its ability to manufacture product quickly
enough to meet potential demand; its ability to integrate Vineyard
Networks and realize anticipated benefits from the acquisition; and
other risks and uncertainties described more fully in the company's
documents filed with or furnished to the Securities and Exchange
Commission. More information about these and other risks that may
impact Procera Networks' business are described in the "Risk Factors"
section of its Form 10-K filed for the year ended December 31, 2011,
its quarterly reports filed on Form 10-Q in 2012, and other reports
filed with the SEC, which are available free of charge on the SEC's
website at http://www.sec.gov or on Procera's website at
http://www.proceranetworks.com. Given these risks and uncertainties,
investors should not place undue reliance on forward-looking
statements as a prediction of actual results. All forward-looking
statements in this press release are based on information available
to Procera as of the date hereof, and the company undertakes no
obligation to update, amend or clarify any forward-looking statement
for any reason. 
Use of Non-GAAP Financial Information
 In addition to the financial
results presented in accordance with Generally Accepted Accounting
Principles (GAAP), this press release and the accompanying tables and
the related earnings conference call contain certain non-GAAP
financial measures. Our management regularly uses these supplemental
non-GAAP financial measures internally to understand and manage our
business and forecast future periods and believes that these non-GAAP
financial measures, when taken together with the corresponding GAAP
measures, provide incremental insight into the underlying factors and
trends affecting both the Company's performance and its
cash-generating potential.  
Our non-GAAP financial measures include adjustments for stock-based
compensation expenses and business development expenses. We have
excluded the effect of stock-based compensation and the cost of
outside professional services for negotiating and performing legal,
accounting and tax due diligence for potential mergers, acquisitions
and other significant partnership arrangements from our non-GAAP
gross profit, operating expenses and net income measures. Stock-based
compensation, which represents the estimated fair value of stock
options and restricted stock granted to employees, is excluded since
grant activities vary significantly from quarter to quarter in both
quantity and fair value. In addition, although stock-based
compensation will recur in future periods, excluding this expense
allows us to better compare core operating results with those of our
competitors who also generally exclude stock-based compensation from
their core operating results, and who may have different granting
patterns and types of equity awards and who may use different option
valuation assumptions than we do. Business development expenses are
necessary as part of certain growth strategies, such as through
mergers and acquisitions and will occur when such transactions are
pursued. We have excluded these expenses because they can vary
materially from period to period and transaction-to-transaction and
expenses associated with these business development activities are
not considered a key measure of the Company's operating performance. 
Our non-GAAP financial measures may not reflect the full economic
impact of the Company's activities. Further, these non-GAAP financial
measures may be unique to the Company, as they may be different from
non-GAAP financial measures used by other companies. As such, this
presentation of non-GAAP financial measures may not enhance the
comparability of the Company's results to the results of other
companies. Therefore, these non-GAAP financial measures are limited
in their usefulness and investors are cautioned not to place undue
reliance on our non-GAAP financial measures. In addition, investors
are cautioned that these non-GAAP financial measures are not intended
to be considered in isolation and should be read in conjunction with
our consolidated financial statements prepared in accordance with
GAAP. 
For a reconciliation of these non-GAAP financial measures to the most
directly comparable GAAP financial measures, please see the section
of the accompanying tables titled, "GAAP to Non-GAAP
Reconciliations." 
About Procera Networks, Inc. 
 Procera Networks Inc. (NASDAQ: PKT)
delivers Intelligent Policy Enforcement solutions designed for
carriers, service providers and enterprises worldwide. Procera's
PacketLogic solutions provide actionable intelligence and policy
enforcement to ensure a high quality experience for any Internet
connected devices. Network operators deploy Procera's technology to
enable real-time visibility, superior performance and scalability,
and deliver personalized services for millions of enterprises and
consumers. For more information, visit www.proceranetworks.com or
follow Procera on twitter at @ProceraNetworks
(http://twitter.com/proceranetworks).  


 
                                                                            
Procera Networks, Inc.                                                      
Condensed Consolidated Statements of Operations                             
Unaudited                                                                   
(in thousands, except per share data)                                       
                               Three Months Ended      Twelve Months Ended  
                                  December 31,            December 31,      
                             ----------------------  ---------------------- 
                                2012        2011        2012        2011    
                             ----------  ----------  ----------  ---------- 
Sales:                                                                      
  Product sales              $   13,083  $   13,443  $   47,723  $   37,450 
  Support sales                   3,486       2,188      11,904       6,954 
                             ----------  ----------  ----------  ---------- 
    Total sales                  16,569      15,631      59,627      44,404 
Cost of sales:                                                              
  Product cost of sales           5,048       6,738      17,720      17,358 
  Support cost of sales             794         206       1,749         723 
                             ----------  ----------  ----------  ---------- 
  Total cost of sales             5,842       6,944      19,469      18,081 
                             ----------  ----------  ----------  ---------- 
                                                                            
    Gross profit                 10,727       8,687      40,158      26,323 
                             ----------  ----------  ----------  ---------- 
                                   64.7%       55.6%       67.3%       59.3%
Operating expenses:                                                         
  Research and development        2,059       1,343       7,472       4,647 
  Sales and marketing             5,105       3,843      18,158      12,026 
  General and administrative      2,399       1,724       9,223       5,707 
                             ----------  ----------  ----------  ---------- 
    Total operating expenses      9,563       6,910      34,853      22,380 
                             ----------  ----------  ----------  ---------- 
                                                                            
Income from operations            1,164       1,777       5,305       3,943 
                             ----------  ----------  ----------  ---------- 
                                                                            
Interest and other income                                                   
 (expense), net                      41         (52)        149        (143)
                             ----------  ----------  ----------  ---------- 
                                                                            
  Income before income taxes      1,205       1,725       5,454       3,800 
Income tax provision                                                        
 (benefit)                          (18)        (35)        123          45 
                             ----------  ----------  ----------  ---------- 
  Net income                 $    1,223  $    1,760  $    5,331  $    3,755 
                             ==========  ==========  ==========  ========== 
                                                                            
Net income per share - basic $     0.06  $     0.12  $     0.30  $     0.29 
                             ==========  ==========  ==========  ========== 
Net income per share -                                                      
 diluted                     $     0.06  $     0.12  $     0.29  $     0.28 
                             ==========  ==========  ==========  ========== 
                                                                            
Shares used in computing net                                                
 income per share:                                                          
  Basic                          19,410      14,403      17,842      12,932 
  Diluted                        19,830      14,810      18,337      13,219 
                                                                            
                                                                            
Procera Networks, Inc.                                                      
Condensed Consolidated Balance Sheets                                       
(in thousands)                                                              
                                                December 31,   December 31, 
                                                    2012           2011     
                                               -------------  ------------- 
ASSETS                                                                      
Current Assets:                                                             
  Cash and cash equivalents                    $      30,933  $      23,900 
  Short-term investments                             100,762         13,504 
  Accounts receivable, net of allowance               16,603         11,403 
  Inventories, net                                    11,240          7,625 
  Prepaid expenses and other                           2,012            938 
                                               -------------  ------------- 
Total current assets                                 161,550         57,370 
                                                                            
Property and equipment, net                            4,474          1,806 
Goodwill                                                 960            960 
Other non-current assets                                  54             20 
                                               -------------  ------------- 
Total assets                                   $     167,038  $      60,156 
                                               =============  ============= 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
  Accounts payable                             $       5,453  $       3,366 
  Deferred revenue                                     6,953          5,505 
  Accrued liabilities                                  4,949          3,845 
                                               -------------  ------------- 
Total current liabilities                             17,355         12,716 
                                                                            
Non-current liabilities:                                                    
  Deferred revenue                                     2,878            873 
                                               -------------  ------------- 
Total liabilities                                     20,233         13,589 
                                                                            
Commitments and contingencies                              -              - 
                                                                            
Stockholders' equity:                                                       
  Common stock                                            20             15 
  Additional paid-in capital                         199,793        105,205 
  Accumulated other comprehensive loss                   (76)          (390)
  Accumulated deficit                                (52,932)       (58,263)
                                               -------------  ------------- 
Total stockholders' equity                           146,805         46,567 
                                               -------------  ------------- 
                                                                            
Total liabilities and stockholders' equity     $     167,038  $      60,156 
                                               =============  ============= 
                                                                            
                                                                            
Procera Networks, Inc.                                                      
GAAP to Non-GAAP Reconciliation; and Supplemental                           
 Financial Information                                                      
Unaudited                                                                   
(in thousands, except per share data)                                       
                             Three Months Ended         Twelve Months Ended 
                      -------------------------------  -------------------- 
                       December  September   December   December   December 
                         31,        30,        31,        31,        31,    
                         2012       2012       2011       2012       2011   
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Sales - U.S. GAAP as                                                        
 reported             $  16,569  $  16,061  $  15,632  $  59,627  $  44,404 
                                                                            
Reconciliation of                                                           
 Gross Profit:                                                              
  U.S. GAAP as                                                              
   reported           $  10,727  $  11,521  $   8,687  $  40,158  $  26,323 
  As a percentage of                                                        
   sales                   64.7%      71.7%      55.6%      67.3%      59.3%
  Adjustment:                                                               
    Stock-based                                                             
     compensation (1)        52         34         28        150        105 
                      ---------  ---------  ---------  ---------  --------- 
  As Adjusted         $  10,779  $  11,555  $   8,715  $  40,308  $  26,428 
  As a percentage of                                                        
   sales                   65.1%      71.9%      55.8%      67.6%      59.5%
                                                                            
Reconciliation of                                                           
 Operating Expense:                                                         
  U.S. GAAP as                                                              
   reported           $   9,563  $   8,890  $   6,910  $  34,853  $  22,380 
  Adjustment:                                                               
    Stock-based                                                             
     compensation (1)       539        787        482      2,634      1,620 
    Business                                                                
     development                                                            
     expenses (2)           590          -          -      1,236          - 
                      ---------  ---------  ---------  ---------  --------- 
  As Adjusted         $   8,434  $   8,103  $   6,428  $  30,983  $  20,760 
                                                                            
Reconciliation of Net                                                       
 Income:                                                                    
  U.S. GAAP as                                                              
   reported           $   1,223  $   2,763  $   1,759  $   5,331  $   3,755 
  Adjustment:                                                               
    Stock-based                                                             
     compensation (1)       591        821        510      2,784      1,725 
    Business                                                                
     development                                                            
     expenses (2)           590          -          -      1,236          - 
                      ---------  ---------  ---------  ---------  --------- 
  As Adjusted         $   2,404  $   3,584  $   2,269  $   9,351  $   5,480 
                                                                            
Reconciliation of                                                           
 Diluted Net Income                                                         
 Per Share:                                                                 
  U.S. GAAP as                                                              
   reported           $    0.06  $    0.14  $    0.12  $    0.29  $    0.28 
                      =========  =========  =========  =========  ========= 
  Adjustment:                                                               
    Stock-based                                                             
     compensation (1)      0.03       0.04       0.03       0.15       0.13 
    Business                                                                
     development                                                            
     expenses (2)          0.03          -          -       0.07          - 
                      ---------  ---------  ---------  ---------  --------- 
  As Adjusted         $    0.12  $    0.18  $    0.15  $    0.51  $    0.41 
                      =========  =========  =========  =========  ========= 
                                                                            
  Shares used in                                                            
   computing diluted                                                        
   net income per                                                           
   share                 19,830     19,801     14,810     18,337     13,219 
                                                                            
(1) Stock-based compensation expense is calculated in accordance with the   
 fair value recognition provisions of Statements of Financial Accounting    
 Standards No. 123 (R).                                                       
                                                                            
(2) Business development expenses include the cost of outside professional  
 services for negotiating and performing legal, accounting and tax due      
 diligence for potential mergers, acquisitions and other significant        
 partnership arrangements.                                                  

  
Press Contact 
Fran Lowe
Engage PR for Procera Networks
510-748-8200 x225
flowe@engagepr.com  
Investor Relations Contact
Charles Messman or Todd Kehrli
MKR Group Inc.
323-468-2300
pkt@mkr-group.com   
 
 
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