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Exhibit 99.1

 

 

Procera Networks Announces Fourth Quarter and

Fiscal 2014 Financial Results

 

Fremont, CA – February 26, 2015 – Procera Networks, Inc. (NASDAQ: PKT), the global Subscriber Experience company, today reported financial results for its fourth quarter and fiscal year ended on December 31, 2014.

Fourth Quarter 2014 Financial & Business Highlights

 

·

Reported record revenue of $24.2 million

·

The ratio of bookings to revenue was above one

·

Added thirteen new service provider customers

·

Received expansion orders from fifty existing service provider customers

·

Mobile customers represented 56% of product revenue

·

Demonstrated traction with strategic initiatives with delivery of:

§

NFV solution to a wireless service provider

§

Analytics solution to a mobile customer

§

Video analytics to a fixed wireline customer

§

100GE interface cards to a number of Tier 1 customers

·

The GAAP gross profit rate increased to 59% for the fiscal year 2014, compared with 55% for fiscal year 2013.

·

The non-GAAP gross profit rate increased to 61% for the fiscal 2014, compared with 57% for fiscal year 2013.

 

Revenue for the fourth quarter was $24.2 million, compared with $21.3 million in the fourth quarter of 2013, representing a 13% increase.  Revenue for fiscal year 2014 was $75.4 million, compared with $74.7 million for fiscal year 2013, a 1% increase.

 

GAAP net loss for the fourth quarter of 2014 was $1.7 million, or $0.08 per diluted share, compared with a GAAP net loss of $3.3 million, or $0.16 per diluted share, for the fourth quarter of 2013.  GAAP net loss for fiscal year 2014 was $24.8 million, or $1.21 per diluted share, compared with a GAAP net loss of $16.3 million, or $0.81 per diluted share, for fiscal year 2013.

 

Non-GAAP net income for the fourth quarter of 2014 was $0.3 million, or $0.02 per diluted share, compared with a non-GAAP net income of $7 thousand, or $0.00 per diluted share, for the fourth quarter of 2013.  Non-GAAP net loss for fiscal year 2014 was $5.0 million, or $0.25 per diluted share, compared with a non-GAAP net loss of $3.6 million, or $0.18 per diluted share, for fiscal year 2013.

 

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“We ended the year with productivity that demonstrates the strength of our strategic initiatives, achieving a combination of record quarterly revenue and bookings, as well as customer delivery of a number of new strategic products,” said James Brear, president and chief executive officer of Procera Networks. “Seeing the initial benefits of our strategic investments are positive indicators toward our goal of returning Procera to solid revenue growth in 2015.”

Guidance

Revenue for the fiscal year ending December 31, 2015 is expected to grow by 15% compared with the fiscal year ended December 31, 2014.

This guidance is an estimate only and actual performance could differ. Procera’s financial results historically have been volatile, and a number of uncertainties and other factors may cause Procera’s future results, performance or achievements to be materially different from prior results.

 

Conference Call Information
Procera Networks, Inc. is hosting a conference call for analysts and investors to discuss its fourth quarter and fiscal year 2014 results at 1:30 p.m. Pacific time (4:30 p.m. Eastern time) today, February 26, 2015. To access the conference call, dial 1-877-407-0784 (domestic) or 1-201-689-8560 (international). The live audio webcast of the conference call along with supplemental financial information will also be accessible from the “Investor Relations” section of Procera’s website at http://proceranetworks.com/investors. A replay will be available following the call on Procera’s Investor Relations website and for one week at the following numbers: 1-877-870-5176 (domestic), 1-858-384-5517 (international) using ID# 13600798.

 

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 2015 revenue, long-term growth and the market opportunity, the strength of Procera’s strategic initiatives, as well as Procera’s general outlook. 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 Procera’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; Procera’s ability to service and upgrade its products; lengthy sales cycles and lab and field trial delays by service providers; its ability to obtain any follow-on orders from major customers; its customers canceling orders or awards; its ability to achieve revenue recognition on awarded business; its dependence on a limited product line and key customers; its dependence on key employees; its ability to compete in our industry with companies that are significantly larger and have greater resources than us; its ability to manage costs effectively; its ability to protect its intellectual property rights in a global market; its ability to manufacture product quickly enough to meet potential demand; and other risks and uncertainties described more fully in Procera’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" sections of its Form 10-K filed for the year ended December 31, 2013, its subsequently filed quarterly reports, and other reports filed with the SEC, which are available free of charge on the SEC's website at http://www.sec.gov and 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 Procera undertakes no obligation to update, amend or clarify any forward-looking statement for any reason.

 

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Use of Non-GAAP Financial Information
In addition to the financial results presented in accordance with U.S. 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 additional insight into the underlying factors and trends affecting both Procera’s performance and its cash-generating potential.

Our non-GAAP financial measures include adjustments for stock-based compensation expenses; business development expenses; cost reduction efforts; acquisition-related intangible asset and deferred compensation amortization; impairment; and income tax effects. We have excluded the effect of stock-based compensation; the cost of outside professional services for negotiating and performing legal, accounting and tax due diligence for potential mergers and acquisitions; expenses connected with cost reduction efforts; acquisition-related intangible asset and deferred compensation amortization; impairment; and income tax effects, from our non-GAAP gross profit, operating expenses and net income measures. Stock-based compensation, which represents the estimated fair value of stock options, restricted stock and restricted stock units 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 other strategic transactions, 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 Procera's operating performance. Cost reduction efforts occur with shifts in objectives and evolving requirements of the business and can result in fluctuating expenses connected with reducing employment in certain areas. We have excluded these expenses because they can vary significantly from period-to-period and are not considered a key measure of Procera’s operating performance. Acquisition-related intangible asset and deferred compensation amortization, impairment and tax effects represent non-cash charges and benefits that result from the accounting for acquisitions. We have excluded these items because, in any period, they may not directly correlate to the underlying performance of Procera’s business and these items can vary materially from period-to-period and transaction-to-transaction. In addition, we exclude these acquisition-related costs and benefits when evaluating our current operating performance.

 

Our non-GAAP financial measures may not reflect the full economic impact of Procera’s activities. Further, these non-GAAP financial measures may be unique to Procera, as they may be different from non-GAAP financial measures used by other companies, including Procera’s competitors. As such, this presentation of non-GAAP financial measures may not enhance the comparability of Procera’s results to the results of other companies. 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.

 

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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 Reconciliation.”

 

About Procera Networks Inc.
Procera Networks, Inc. (NASDAQ: PKT), the global Subscriber Experience company, is revolutionizing the way operators and vendors monitor, manage and monetize their network traffic. Elevate your business value and improve customer experience with Procera’s sophisticated intelligence solutions. For more information, visit www.proceranetworks.com or follow Procera on Twitter at @ProceraNetworks.

 

Procera Networks, Inc.

Condensed Consolidated Statements of Operations

Unaudited

(in thousands, except per share data)

		Three Months Ended December 31,								Twelve Months Ended December 31,
		2014				2013				2014				2013
Sales:
Product sales		$	18,208			$	16,191			$	54,000			$	56,520
Support sales			5,947				5,139				21,413				18,153
Total sales			24,155				21,330				75,413				74,673
Cost of sales:
Product cost of sales			9,031				8,011				26,676				30,461
Support cost of sales			1,262				957				4,531				3,399
Total cost of sales			10,293				8,968				31,207				33,860
Gross profit			13,862				12,362				44,206				40,813
			57.4	%			58.0	%			58.6	%			54.7	%
Operating expenses:
Research and development			4,362				5,016				16,722				17,548
Sales and marketing			7,406				7,959				27,831				29,251
General and administrative			3,426				2,537				11,738				12,036
Impairment of goodwill and purchased intangible assets			-				-				12,380				-
Total operating expenses			15,194				15,512				68,671				58,835
Loss from operations			(1,332	)			(3,150	)			(24,465	)			(18,022	)
Interest and other income (expense), net			(354	)			359				(599	)			561
Loss before income taxes			(1,686	)			(2,791	)			(25,064	)			(17,461	)
Income tax provision (benefit)			34				511				(248	)			(1,177	)
Net loss		$	(1,720	)		$	(3,302	)		$	(24,816	)		$	(16,284	)
Net loss per share - basic and diluted		$	(0.08	)		$	(0.16	)		$	(1.21	)		$	(0.81	)
Shares used in computing net loss per share:
Basic and diluted			20,613				20,144				20,450				20,091

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Procera Networks, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

		December 31, 2014				December 31, 2013
		(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	17,939			$	90,774
Short-term investments			84,542				15,789
Accounts receivable, net of allowance			21,447				25,008
Inventories, net			14,837				18,836
Prepaid expenses and other			4,913				2,128
Total current assets			143,678				152,535
Property and equipment, net			8,322				7,121
Intangible assets, net			2,957				6,270
Goodwill			960				12,326
Deferred tax asset			-				1,101
Other non-current assets			154				83
Total assets		$	156,071			$	179,436
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	5,207			$	7,305
Deferred revenue			11,821				11,633
Accrued liabilities			7,235				6,721
Total current liabilities			24,263				25,659
Non-current liabilities:
Deferred revenue			3,113				3,273
Deferred tax liability			-				1,690
Deferred rent			583				143
Total liabilities			27,959				30,765
Commitments and contingencies			-				-
Stockholders' equity:
Common stock			21				21
Additional paid-in capital			225,313				219,763
Accumulated other comprehensive loss			(3,190	)			(1,897	)
Accumulated deficit			(94,032	)			(69,216	)
Total stockholders' equity			128,112				148,671
Total liabilities and stockholders' equity		$	156,071			$	179,436

 

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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 2014				September 2014				December  2013				December 2014				December 2013
Sales:
Product sales		$	18,208			$	11,164			$	16,191			$	54,000			$	56,520
Support sales			5,947				4,945				5,139				21,413				18,153
Total sales			24,155				16,109				21,330				75,413				74,673
Cost of sales:
Product cost of sales, GAAP			9,031				4,774				8,011				26,676				30,461
Non-GAAP adjustments:
Stock-based compensation (1)			(10	)			(7	)			(26	)			(39	)			(84	)
Amortization of intangibles (2)			(202	)			(264	)			(275	)			(995	)			(1,094	)
Cost reduction efforts (3)			-				-				-				(237	)			-
Product cost of sales, non-GAAP			8,819				4,503				7,710				25,405				29,283
Support cost of sales, GAAP			1,262				1,118				957				4,531				3,399
Non-GAAP adjustments:
Stock-based compensation (1)			(98	)			(85	)			(79	)			(351	)			(302	)
Cost reduction efforts (3)			-				-				-				-				-
Support cost of sales, non-GAAP			1,164				1,033				878				4,180				3,097
Total cost of sales, non-GAAP			9,983				5,536				8,588				29,585				32,380
Gross profit, non-GAAP			14,172				10,573				12,742				45,828				42,293
			58.7	%			65.6	%			59.7	%			60.8	%			56.6	%
Operating expenses:
Research and development			4,362				4,096				5,016				16,722				17,548
Non-GAAP adjustments:
Stock-based compensation (1)			(429	)			(314	)			(292	)			(1,427	)			(1,226	)
Cost reduction efforts (3)			(58	)			-				-				(264	)			-
Deferred compensation (5)			-				-				(753	)			(65	)			(2,946	)
Research and development, non-GAAP			3,875				3,782				3,971				14,966				13,376
Sales and marketing			7,406				6,497				7,959				27,831				29,251
Non-GAAP adjustments:
Stock-based compensation (1)			(276	)			(443	)			(334	)			(1,525	)			(1,682	)
Amortization of intangibles (2)			(47	)			(114	)			(119	)			(389	)			(472	)
Cost reduction efforts (3)			(91	)			(327	)			-				(606	)			-
Deferred compensation (5)			-				-				(777	)			-				(2,863	)
Sales and marketing, non-GAAP			6,992				5,613				6,729				25,311				24,234
General and administrative			3,426				2,760				2,537				11,738				12,036
Non-GAAP adjustments:
Stock-based compensation (1)			(656	)			(429	)			(512	)			(1,856	)			(1,763	)
Cost reduction efforts (3)			-				-				-				(27	)			-
Business development expenses (6)			(229	)			-				-				(229	)			(1,616	)
General and administrative, non-GAAP			2,541				2,331				2,025				9,626				8,657

 

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Impairment of goodwill and purchased intangible assets			-				12,380				-				12,380				-
Non-GAAP adjustments:
Impairment of goodwill and purchased intangible assets (4)			-				(12,380	)			-				(12,380	)			-
Impairment of goodwill and purchased intangible assets, non-GAAP			-				-				-				-				-
Total operating expenses, non-GAAP			13,408				11,726				12,725				49,903				46,267
Income (loss) from operations, non-GAAP			764				(1,153	)			17				(4,075	)			(3,974	)
Interest and other income (expense), net			(354	)			(356	)			359				(599	)			561
Income (loss) before income taxes, non-GAAP			410				(1,509	)			376				(4,674	)			(3,413	)
Income tax provision (benefit)			34				(160	)			511				(248	)			(1,177	)
Non-GAAP adjustment (7)			44				192				(142	)			622				1,408
Income tax provision, non-GAAP			78				32				369				374				231
Net income (loss), non-GAAP		$	332			$	(1,541	)		$	7			$	(5,048	)		$	(3,644	)
Net income (loss) per share - diluted, non-GAAP		$	0.02			$	(0.08	)		$	0.00			$	(0.25	)		$	(0.18	)
Shares used in computing diluted net income (loss) per share			20,613				20,500				20,144				20,450				20,091
Reconciliation of Net Income (Loss):
U.S. GAAP as reported		$	(1,720	)		$	(15,712	)		$	(3,302	)		$	(24,816	)		$	(16,284	)
Non-GAAP adjustments:
Stock-based compensation (1)			1,469				1,278				1,243				5,198				5,057
Amortization of intangibles (2)			249				378				394				1,384				1,566
Cost reduction efforts (3)			149				327				-				1,134				-
Impairment of goodwill and purchased intangible assets (4)			-				12,380				-				12,380				-
Deferred compensation (5)			-				-				1,530				65				5,809
Business development expenses (6)			229				-				-				229				1,616
Income tax adjustment (7)			(44	)			(192	)			142				(622	)			(1,408	)
As Adjusted		$	332			$	(1,541	)		$	7			$	(5,048	)		$	(3,644	)
Reconciliation of Diluted Net Income (Loss) Per Share:
U.S. GAAP as reported		$	(0.08	)		$	(0.77	)		$	(0.16	)		$	(1.21	)		$	(0.81	)
Non-GAAP adjustments:
Stock-based compensation (1)			0.07				0.06				0.06				0.25				0.25
Amortization of intangibles (2)			0.01				0.02				0.02				0.06				0.08
Cost reduction efforts (3)			0.01				0.02				-				0.06				-
Impairment of goodwill and purchased intangible assets (4)			-				0.60				-				0.61				-
Deferred compensation (5)			-				-				0.08				-				0.29
Business development expenses (6)			0.01				-				-				0.01				0.08
Income tax adjustment (7)			-				(0.01	)			0.01				(0.03	)			(0.07	)
As Adjusted		$	0.02			$	(0.08	)		$	0.00			$	(0.25	)		$	(0.18	)
Shares used in computing diluted net income (loss) per share			20,613				20,500				20,144				20,450				20,091

 

(1)	Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of ASC Topic 718.

(2)	Amortization expense associated with intangible assets acquired in the Vineyard Networks acquisition.

(3)	Severance and other employee-related costs in connection with the Company’s cost-reduction efforts.

(4)	Impairment charges to write-down the carrying value of goodwill and purchased intangible assets associated with the Vineyard acquisition as a result of lower than anticipated total addressable market and revenue growth of NAVL products.

(5)	Amortization of amounts paid under retention agreements with Vineyard's three founders.

These amounts were paid during the first quarter of fiscal year 2014, after one year of continuous employment with the Company.

(6)	Includes 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.

(7)	Income tax benefit associated with the following Vineyard acquisition related items:

- reversal of Vineyard’s pre-existing income tax valuation allowance upon acquisition;

- amortization of acquired intangible assets; and

- Canadian valuation allowance and book to tax differences on deferred revenue.

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Michael Bishop

Blueshirt Group (for Procera Networks)

mike@blueshirtgroup.com

1-415-217-4968

Bob Eastwood

Engage PR (for Procera Networks)

beastwood@engagepr.com

1-510-748-8200 x215

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