EXHIBIT 99.1
FOR MORE INFORMATION, CONTACT:
Ms. Kelly Love, CFA
Director of Investor Relations
Inet Technologies, Inc.
(469) 330-4171
INET TECHNOLOGIES REPORTS SOLID THIRD QUARTER PERFORMANCE
Company Reports Year-over-Year and Sequential Growth in
Revenues and Net Income
Richardson, Texas – October 21, 2003 – Inet Technologies, Inc. (NASDAQ: INTI),a leading global provider of communications software products that enable communications carriers to more strategically and profitably operate their businesses, today reported financial results for its third quarter ended September 30, 2003.
Revenues for the three months ended September 30, 2003 were $26.0 million versus revenues of $25.5 million in the second quarter of 2003 and $23.2 million in the third quarter of 2002. The Company reported net income of $2.8 million, or $0.07 per diluted share, for the third quarter of 2003, compared to net income of $2.3 million, or $0.06 per diluted share, for the second quarter of 2003 and net income of $0.8 million, or $0.02 per diluted share, for the third quarter of 2002.
“We are extremely pleased to report third quarter results that reflect solid year-over-year and sequential growth in revenues and net income,” said Elie Akilian, president and chief executive officer of Inet. “We continue to make great strides in executing our strategy. Based on customer feedback and wins to date, we believe we are emerging as a leading provider of mobile data solutions. Our broad product portfolio coupled with our technological leadership position us well to capitalize on the growth opportunities offered by the emergence of mobile data and voice-over-packet networks and technologies.”
For the nine months ended September 30, 2003, revenues were $76.5 million versus revenues of $76.9 million for the nine months ended September 30, 2002. Net income for the nine months ended September 30, 2003 was $8.3 million, or $0.21 per diluted share, compared to net income of $4.9 million, or $0.10 per diluted share, for the nine months ended September 30, 2002.
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During the third quarter of 2003, the Company had three customers that each accounted for more than 10 percent of total revenues – a domestic wireline carrier accounted for approximately 21 percent of total revenues and two international wireline carriers each accounted for approximately 18 percent of total revenues for the quarter. Revenues from the top 10 customers in the third quarter represented approximately 71 percent of total revenues. The Company expects to continue to have one to three 10 percent customers in most quarters and for the top 10 customers in each quarter to generate between 50 and 80 percent of total revenues. For the nine months ended September 30, 2003, revenues from wireless providers represented approximately 31 percent of total revenues.
Financial Guidance
The Company provided the following financial guidance for its fourth quarter ending December 31, 2003 and for the year ending December 31, 2004. The following guidance is based on current expectations. This guidance is forward-looking and actual results may differ materially.
Quarter Ending | Year Ending | |||
Revenues | $26.4 to $27.2 million | $112 to $117 million | ||
Gross margin | 64% to 66% | 67% to 71% | ||
Quarterly operating margin | 14% to 17% | 14% to 22% | ||
EPS | $0.07 to $0.08 | $0.36 to $0.38 |
The wide range in the guidance for quarterly operating margins during 2004 reflects the operating leverage we expect as we begin to grow our revenues throughout 2004. In the fourth quarter of 2003, the Company expects its tax rate to mirror its year-to-date rate of approximately 30 percent, and for 2004 expects its tax rate to range from 30 to 31 percent. The diluted share count is expected to range from the mid-39 million level to approximately 41 million between the fourth quarter of 2003 and the end of 2004.
“Our strong visibility of future project implementations is what gives us the confidence to resume providing financial guidance,” said Jeff Kupp, chief financial officer of Inet. “The growth we have projected for next year is based on our healthy sales pipeline, which has been growing in recent quarters, and discussions we have had with certain of our key customers regarding spending levels for next year. Our projections do not assume any change in overall carrier capital spending levels for 2004.”
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Secondary Stock Offering
In October 2003, the Company successfully completed an underwritten secondary public stock offering of 8,958,000 shares of common stock. All of the shares were offered by two of the Company’s founders, Elie S. Akilian, its president, chief executive officer and director, and Samuel S. Simonian, its chairman of the board. The offering was managed by Morgan Stanley as sole bookrunner and Raymond James & Associates, Inc.
“The secondary offering helped us achieve a number of goals that we have hoped to address since becoming a public company,” said Mr. Kupp. “We were able to increase the public float from approximately 34 percent to 59 percent. We believe that the increased public float will improve the liquidity of our stock, which will benefit existing stockholders and help attract potential stockholders. The offering also gave us an opportunity to share the Inet story with a number of new investors and, as a result, we successfully broadened our base of stockholders.”
About Inet Technologies, Inc.
Founded in 1989, Inet Technologies is a global provider of communications software products that enable communications carriers to more strategically and profitably operate their businesses. Our Unified AssuranceTM Solution and our Diagnostics products help our customers reduce capital and operating expenditures, improve customer acquisition and retention rates, protect and grow revenues, and more quickly and effectively develop products or services. Using our Unified Assurance Solution products, communications carriers are able to simultaneously manage their voice and data services at the network, service and customer layers to detect network and service problems in real time, enabling proactive identification of specific customers impacted by network or service issues. Our Diagnostics products assist communications carriers and equipment manufacturers in quickly and cost-effectively designing, deploying and maintaining current- and next-generation networks and network elements. Inet is headquartered in Richardson, Texas and has approximately 479 employees worldwide. Inet is an ISO 9001 registered company. For more information, visit Inet on the Web atwww.inet.com.
Inet Technologies and Unified Assurance are trademarks of Inet Technologies, Inc. All other trademarks or registered trademarks belong to their respective owners.
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This release contains forward-looking statements, including statements regarding our business prospects, our anticipated future financial results, anticipated benefits of the recent secondary stock offering and the anticipated results of some of our product and operating strategies. Such forward-looking statements involve risks and uncertainties. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are the effects of a further general economic slowdown, any further slowdown in telecommunications spending, consolidations or bankruptcies involving our current or prospective customers, unforeseen changes in anticipated expenses or revenues, challenges associated with operating internationally, delays in implementation of our products, product development and introduction delays, increased competition, any reduction in demand for our products and solutions and other factors detailed in Inet’s filings with the Securities and Exchange Commission, including our Current Report on Form 8-K filed with the SEC on September 18, 2003.
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INET TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
| September 30, 2003 | December 31, 2002 | |||||||
| ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 168,742 | $ | 189,076 | ||||
Trade accounts receivable, net | 7,487 | 10,211 | ||||||
Unbilled receivables | 33 | 155 | ||||||
Inventories | 6,615 | 7,458 | ||||||
Deferred income taxes | 907 | 850 | ||||||
Other current assets | 6,999 | 4,909 | ||||||
Total current assets | 190,783 | 212,659 | ||||||
Property and equipment, net | 12,353 | 15,215 | ||||||
Other assets | 586 | 300 | ||||||
Total assets | $ | 203,722 | $ | 228,174 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,761 | $ | 1,078 | ||||
Accrued compensation and benefits | 2,651 | 4,113 | ||||||
Deferred revenues | 19,496 | 18,323 | ||||||
Income taxes payable | 508 | 1,953 | ||||||
Other accrued liabilities | 5,190 | 4,733 | ||||||
Total current liabilities | 29,606 | 30,200 | ||||||
Deferred income taxes | 149 | 18 | ||||||
Commitments and contingencies | ||||||||
Common stock | 47 | 47 | ||||||
Additional paid-in capital | 76,012 | 75,075 | ||||||
Unearned compensation | (310 | ) | (407 | ) | ||||
Retained earnings | 131,545 | 123,241 | ||||||
Treasury stock | (33,327 | ) | — | |||||
Total stockholders’ equity | 173,967 | 197,956 | ||||||
Total liabilities and stockholders’ equity | $ | 203,722 | $ | 228,174 | ||||
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INET TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||
Revenues: | |||||||||||||||
Product and license fees | $ | 18,072 | $ | 16,569 | $ | 53,360 | $ | 56,805 | |||||||
Services | 7,962 | 6,587 | 23,188 | 20,066 | |||||||||||
Total revenues | 26,034 | 23,156 | 76,548 | 76,871 | |||||||||||
Cost of revenues: | |||||||||||||||
Product and license fees | 4,717 | 6,975 | 13,955 | 21,178 | |||||||||||
Services | 3,743 | 3,008 | 11,213 | 9,473 | |||||||||||
Total cost of revenues | 8,460 | 9,983 | 25,168 | 30,651 | |||||||||||
Gross profit | 17,574 | 13,173 | 51,380 | 46,220 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 7,412 | 7,026 | 22,354 | 22,776 | |||||||||||
Sales and marketing | 3,889 | 3,642 | 11,012 | 12,506 | |||||||||||
General and administrative | 2,456 | 1,829 | 6,936 | 5,967 | |||||||||||
Restructuring costs | — | 224 | — | 224 | |||||||||||
| 13,757 | 12,721 | 40,302 | 41,473 | ||||||||||||
Income from operations | 3,817 | 452 | 11,078 | 4,747 | |||||||||||
Other income (expense): | |||||||||||||||
Interest income | 290 | 654 | 1,088 | 2,009 | |||||||||||
Other income (expense) | (140 | ) | (31 | ) | (249 | ) | 203 | ||||||||
| 150 | 623 | 839 | 2,212 | ||||||||||||
Income before provision for income taxes | 3,967 | 1,075 | 11,917 | �� | 6,959 | ||||||||||
Provision for income taxes | 1,189 | 269 | 3,613 | 2,088 | |||||||||||
Net income | $ | 2,778 | $ | 806 | $ | 8,304 | $ | 4,871 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 0.07 | $ | 0.02 | $ | 0.21 | $ | 0.10 | |||||||
Diluted | $ | 0.07 | $ | 0.02 | $ | 0.21 | $ | 0.10 | |||||||
Weighted-average shares outstanding: | |||||||||||||||
Basic | 38,612 | 47,011 | 39,129 | 46,913 | |||||||||||
Diluted | 39,238 | 47,043 | 39,461 | 47,018 | |||||||||||
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INET TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine months ended September 30, | ||||||||
| 2003 | 2002 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 8,304 | $ | 4,871 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 5,282 | 5,329 | ||||||
Stock compensation | 206 | — | ||||||
Deferred income taxes | 74 | 638 | ||||||
Changes in operating assets and liabilities: | ||||||||
Decrease in trade accounts receivable | 2,724 | 922 | ||||||
Decrease in unbilled receivables | 122 | 1,561 | ||||||
Decrease in income taxes receivable | — | 701 | ||||||
Decrease in inventories | 843 | 4,838 | ||||||
Increase in other assets | (2,376 | ) | (239 | ) | ||||
Increase in accounts payable | 683 | 1,520 | ||||||
Decrease in taxes payable | (962 | ) | — | |||||
Increase (decrease) in accrued compensation and benefits | (1,462 | ) | 606 | |||||
Increase (decrease) in deferred revenues | 1,173 | (5,402 | ) | |||||
Increase in other accrued liabilities | 957 | 1,428 | ||||||
Net cash provided by operating activities | 15,568 | 16,773 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (2,920 | ) | (1,554 | ) | ||||
Net cash used in investing activities | (2,920 | ) | (1,554 | ) | ||||
Cash flows from financing activities: | ||||||||
Repurchase of common stock | (35,553 | ) | — | |||||
Proceeds from issuance of common stock upon exercise of stock options and purchases under employee stock purchase plan | 2,571 | 1,603 | ||||||
Net cash provided by (used in) financing activities | (32,982 | ) | 1,603 | |||||
Net (decrease) increase in cash and cash equivalents | (20,334 | ) | 16,822 | |||||
Cash and cash equivalents at beginning of period | 189,076 | 154,889 | ||||||
Cash and cash equivalents at end of period | $ | 168,742 | $ | 171,711 | ||||
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INET TECHNOLOGIES, INC.
ADDITIONAL FINANCIAL INFORMATION
(Unaudited)
The following table presents additional financial information about Inet Technologies, Inc. for the three months ended September 30, 2003; June 30, 2003; March 31, 2003; December 31, 2002 and September 30, 2002, respectively.
| 9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | 9/30/02 | ||||||||||||||||
Cash (in 000s) | $ | 168,742 | $ | 162,312 | $ | 163,139 | $ | 189,076 | $ | 171,711 | ||||||||||
Days sales outstanding (with unbilled) | 27 | 50 | 43 | 38 | 57 | |||||||||||||||
Inventory (in 000s): | ||||||||||||||||||||
Raw materials | $ | 2,856 | $ | 2,765 | $ | 3,268 | $ | 3,774 | $ | 4,489 | ||||||||||
WIP | 90 | 412 | 154 | 445 | 1,212 | |||||||||||||||
Finished goods | 3,669 | 3,592 | 5,003 | 3,239 | 1,915 | |||||||||||||||
| $ | 6,615 | $ | 6,769 | $ | 8,425 | $ | 7,458 | $ | 7,616 | |||||||||||
Inventory turns | 5.1 | 5.7 | 3.4 | 4.6 | 5.2 | |||||||||||||||
Total employees: | 479 | 475 | 472 | 470 | 480 | |||||||||||||||
R&D | 243 | 242 | 246 | 247 | 249 | |||||||||||||||
Support/Integration | 124 | 122 | 121 | 121 | 126 | |||||||||||||||
Sales and marketing | 69 | 66 | 61 | 62 | 64 | |||||||||||||||
General and administrative | 43 | 45 | 44 | 40 | 41 | |||||||||||||||
Margins and operating expenses | ||||||||||||||||||||
as a % of total revenues: | ||||||||||||||||||||
Gross margin – total | 67.5 | % | 62.2 | % | 71.8 | % | 65.3 | % | 56.9 | % | ||||||||||
Gross margin – product & license fees | 73.9 | 64.3 | 83.4 | 68.9 | 57.9 | |||||||||||||||
Gross margin – services | 53.0 | 57.1 | 44.6 | 56.4 | 54.3 | |||||||||||||||
Research and development | 28.5 | 28.5 | 30.7 | 28.2 | 30.3 | |||||||||||||||
Sales and marketing | 14.9 | 14.2 | 14.0 | 16.0 | 15.7 | |||||||||||||||
General and administrative | 9.4 | 8.1 | 9.7 | 8.1 | 7.9 | |||||||||||||||
Operating income margin | 14.7 | 11.4 | 17.4 | 13.1 | 2.0 | |||||||||||||||
Net income margin | 10.7 | 8.9 | 13.0 | 10.9 | 3.5 | |||||||||||||||
Operating cash flow (in 000s) | $ | 5,642 | $ | 116 | $ | 9,810 | $ | 18,099 | $ | 288 | ||||||||||
Capital expenditures (in 000s) | $ | 666 | $ | 1,322 | $ | 932 | $ | 735 | $ | 241 | ||||||||||
Common stock outstanding (in 000s) | 38,722 | 38,436 | 38,362 | 47,158 | 47,073 | |||||||||||||||
Revenues from international markets: | 63 | % | 72 | % | 81 | % | 71 | % | 66 | % | ||||||||||
EMEA | 53 | % | 61 | % | 71 | % | 63 | % | 59 | % | ||||||||||
Asia/Pacific | 8 | % | 9 | % | 8 | % | 5 | % | 5 | % | ||||||||||
Other | 2 | % | 3 | % | 2 | % | 3 | % | 2 | % | ||||||||||
Top 10 customers as % of total revenues | 71 | % | 60 | % | 69 | % | 71 | % | 67 | % | ||||||||||
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