Exhibit 99.1
| FOR MORE INFORMATION, CONTACT: | ||
Ms. Kelly Love, CFA | ||
Director of Investor Relations | ||
Inet Technologies, Inc. | ||
(469) 330-4171 |
INET TECHNOLOGIES REPORTS SEQUENTIAL AND YEAR-OVER-YEAR
GROWTH IN REVENUES AND NET INCOME
Annual Net Income Increases by More Than 50 Percent
Richardson, Texas – January 27, 2004 – 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 fourth quarter and year ended December 31, 2003.
Revenues for the three months ended December 31, 2003 were $27.3 million versus revenues of $26.0 million in the third quarter of 2003 and $25.0 million in the fourth quarter of 2002. The Company reported net income of $3.4 million, or $0.09 per diluted share, for the fourth quarter of 2003, compared to net income of $2.8 million, or $0.07 per diluted share, for the third quarter of 2003 and net income of $2.7 million, or $0.06 per diluted share, for the fourth quarter of 2002.
“The Inet team’s relentless efforts had a positive impact on our customers and stockholders as well as our future business prospects,” said Elie Akilian, president and chief executive officer of Inet. “Last year, we broadened our product portfolio through the introduction of our Unified Assurance Solution and our Spectra2 version 3.0 product. We experienced great success in the form of key wins with our products to address the mobile data market, and we believe we are well positioned for the opportunities in this growing segment. I am proud of our progress, and I am excited about our prospects as we enter 2004.”
For the year ended December 31, 2003, revenues were $103.8 million versus revenues of $101.9 million for the year ended December 31, 2002. Net income for the year ended December 31, 2003 was $11.7 million, or $0.30 per diluted share, compared to net income of $7.6 million, or $0.16 per diluted share, for the year ended December 31, 2002.
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“Revenues for the year increased slightly over the prior year, and net income grew 54 percent,” said Jeff Kupp, chief financial officer of Inet. “In addition to solid operating results, we continued to strengthen our balance sheet. We were able to achieve these results without reducing the investments in our business that are required to pursue future growth opportunities. Also, we reduced outstanding shares through a large share repurchase in January 2003, and improved the public float and liquidity of our common stock through a secondary stock offering in October 2003. I believe we are well positioned financially to take advantage of a number of opportunities in 2004.”
Financial Guidance
The Company provided the following financial guidance for its first quarter ending March 31, 2004 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 March 31, 2004 | Year Ending December 31, 2004 | |||
Revenues | $27.0 to $27.4 million | $112 to $117 million | ||
Gross margin | 67% to 69% | 67% to 71% | ||
Quarterly operating margin | 14% to 15% | 14% to 22% | ||
EPS | $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 to achieve as we begin to grow our revenues throughout 2004. For the first quarter and year of 2004, the Company expects its tax rate to be approximately 29 percent. The diluted share count is expected to range from the mid-39 million level to approximately 41 million between the first quarter of 2004 and the end of 2004.
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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 Assurance™ 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 483 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.
This release contains forward-looking statements, including statements regarding our business prospects, our anticipated future financial results 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 any general economic slowdown, any 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 Quarterly Report on Form 10-Q filed with the SEC on October 21, 2003.
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INET TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
| December 31, | ||||||||
| 2003 | 2002 | |||||||
| ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 118,527 | $ | 189,076 | ||||
Short-term investments | 55,034 | — | ||||||
Trade accounts receivable | 10,870 | 10,211 | ||||||
Unbilled receivables | 146 | 155 | ||||||
Inventories | 7,924 | 7,458 | ||||||
Deferred income taxes | 1,628 | 850 | ||||||
Other current assets | 5,055 | 4,909 | ||||||
Total current assets | 199,184 | 212,659 | ||||||
Property and equipment, net | 11,330 | 15,215 | ||||||
Deferred income taxes | 217 | — | ||||||
Other assets | 613 | 300 | ||||||
Total assets | $ | 211,344 | $ | 228,174 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,919 | $ | 1,078 | ||||
Income taxes payable | 2,408 | 1,792 | ||||||
Accrued compensation and benefits | 4,115 | 4,113 | ||||||
Deferred revenues | 21,554 | 18,323 | ||||||
Other accrued liabilities | 3,724 | 4,894 | ||||||
Total current liabilities | 33,720 | 30,200 | ||||||
Deferred tax liabilities | — | 18 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common Stock | 47 | 47 | ||||||
Additional paid-in capital | 77,866 | 75,075 | ||||||
Unearned stock compensation | (2,610 | ) | (407 | ) | ||||
Retained earnings | 134,932 | 123,241 | ||||||
Treasury stock | (32,611 | ) | — | |||||
Total stockholders’ equity | 177,624 | 197,956 | ||||||
Total liabilities and stockholders’ equity | $ | 211,344 | $ | 228,174 | ||||
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INET TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
| Three months ended December 31, | Years ended December 31, | |||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||
Revenues: | ||||||||||||||
Product and license fees | $ | 19,652 | $ | 17,800 | $ | 73,012 | $ | 74,605 | ||||||
Services | 7,619 | 7,215 | 30,807 | 27,281 | ||||||||||
Total revenues | 27,271 | 25,015 | 103,819 | 101,886 | ||||||||||
Cost of revenues: | ||||||||||||||
Product and license fees | 5,952 | 5,527 | 19,907 | 26,705 | ||||||||||
Services | 3,006 | 3,147 | 14,219 | 12,620 | ||||||||||
Total cost of revenues | 8,958 | 8,674 | 34,126 | 39,325 | ||||||||||
Gross profit | 18,313 | 16,341 | 69,693 | 62,561 | ||||||||||
Operating expenses: | ||||||||||||||
Research and development | 7,435 | 7,044 | 29,789 | 29,820 | ||||||||||
Sales and marketing | 4,514 | 4,001 | 15,526 | 16,507 | ||||||||||
General and administrative | 2,231 | 2,015 | 9,167 | 7,982 | ||||||||||
Restructuring costs | — | — | — | 224 | ||||||||||
| 14,180 | 13,060 | 54,482 | 54,533 | |||||||||||
Income from operations | 4,133 | 3,281 | 15,211 | 8,028 | ||||||||||
Other income (expense): | ||||||||||||||
Interest income | 323 | 582 | 1,411 | 2,591 | ||||||||||
Other income (expense) | 68 | (40 | ) | (181 | ) | 163 | ||||||||
| 391 | 542 | 1,230 | 2,754 | |||||||||||
Income before provision for income taxes | 4,524 | 3,823 | 16,441 | 10,782 | ||||||||||
Provision for income taxes | 1,137 | 1,085 | 4,750 | 3,173 | ||||||||||
Net income | $ | 3,387 | $ | 2,738 | $ | 11,691 | $ | 7,609 | ||||||
Earnings per common share: | ||||||||||||||
Basic | $ | 0.09 | $ | 0.06 | $ | 0.30 | $ | 0.16 | ||||||
Diluted | $ | 0.09 | $ | 0.06 | $ | 0.30 | $ | 0.16 | ||||||
Weighted-average shares outstanding: | ||||||||||||||
Basic | 38,852 | 47,116 | 39,059 | 46,964 | ||||||||||
Diluted | 39,567 | 47,191 | 39,516 | 47,084 | ||||||||||
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INET TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Years Ended December 31, | ||||||||||||
| 2003 | 2002 | 2001 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 11,691 | $ | 7,609 | $ | 193 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 6,867 | 7,078 | 7,875 | |||||||||
Amortization of purchase discount on investments | (35 | ) | — | — | ||||||||
Loss on sale or disposal of assets | 4 | 10 | 326 | |||||||||
Deferred income taxes (benefits) | (1,013 | ) | 1,294 | (948 | ) | |||||||
Stock compensation | 347 | 18 | — | |||||||||
Change in operating assets and liabilities: | ||||||||||||
(Increase) decrease in trade accounts receivable | (659 | ) | 4,723 | 32,700 | ||||||||
(Increase) decrease in unbilled receivables | 9 | 1,800 | (30 | ) | ||||||||
(Increase) decrease in inventories | (466 | ) | 4,996 | (3,073 | ) | |||||||
Decrease in income taxes receivable | — | 615 | 11,422 | |||||||||
(Increase) decrease in other assets | (459 | ) | 539 | (2,154 | ) | |||||||
Increase (decrease) in accounts payable | 841 | 140 | (3,691 | ) | ||||||||
Increase in income taxes payable | 1,143 | 2,034 | — | |||||||||
Increase (decrease) in accrued compensation and benefits | 2 | 1,638 | (5,410 | ) | ||||||||
Increase (decrease) in deferred revenues | 3,231 | 1,530 | (5,951 | ) | ||||||||
Increase (decrease) in other accrued liabilities | (170 | ) | 849 | (2,331 | ) | |||||||
Net cash provided by operating activities | 21,333 | 34,873 | 28,928 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of short-term investments | (54,999 | ) | — | — | ||||||||
Purchases of property and equipment | (3,986 | ) | (2,290 | ) | (8,470 | ) | ||||||
Net cash used in investing activities | (58,985 | ) | (2,290 | ) | (8,470 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Repurchase of common stock | (35,644 | ) | — | — | ||||||||
Proceeds from issuance of common stock upon exercise of stock options and purchases under employee stock purchase plan | 2,747 | 1,604 | 3,012 | |||||||||
Net cash provided by (used in) financing activities | (32,897 | ) | 1,604 | 3,012 | ||||||||
Net increase (decrease) in cash and cash equivalents | (70,549 | ) | 34,187 | 23,470 | ||||||||
Cash and cash equivalents at beginning of period | 189,076 | 154,889 | 131,419 | |||||||||
Cash and cash equivalents at end of period | $ | 118,527 | $ | 189,076 | $ | 154,889 | ||||||
Supplemental disclosures: | ||||||||||||
Income taxes paid | $ | 2,564 | $ | 2,182 | $ | 508 | ||||||
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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 December 31, 2003; September 30, 2003; June 30, 2003; March 31, 2003 and December 31, 2002, respectively.
| 12/31/03 | 9/30/03 | 6/30/03 | 3/31/03 | 12/31/02 | ||||||||||||||||
Total revenues (in 000s) (1) | $ | 27,271 | (2) | $ | 26,034 | $ | 25,472 | $ | 25,042 | $ | 25,015 | |||||||||
Cash (in 000s) | $ | 118,527 | $ | 168,742 | $ | 162,312 | $ | 163,139 | $ | 189,076 | ||||||||||
Short-term investments (in 000s) | $ | 55,034 | — | — | — | — | ||||||||||||||
Days sales outstanding (with unbilled) | 37 | 27 | 50 | 43 | 38 | |||||||||||||||
Inventory (in 000s): | ||||||||||||||||||||
Raw materials | $ | 3,498 | $ | 2,856 | $ | 2,765 | $ | 3,268 | $ | 3,774 | ||||||||||
WIP | 219 | 90 | 412 | 154 | 445 | |||||||||||||||
Finished goods | 4,207 | 3,669 | 3,592 | 5,003 | 3,239 | |||||||||||||||
| $ | 7,924 | $ | 6,615 | $ | 6,769 | $ | 8,425 | $ | 7,458 | |||||||||||
Inventory turns | 4.5 | 5.1 | 5.7 | 3.4 | 4.6 | |||||||||||||||
Total employees: | 483 | 479 | 475 | 472 | 470 | |||||||||||||||
R&D | 245 | 243 | 242 | 246 | 247 | |||||||||||||||
Support/Integration | 127 | 124 | 122 | 121 | 121 | |||||||||||||||
Sales and marketing | 66 | 69 | 66 | 61 | 62 | |||||||||||||||
General and administrative | 45 | 43 | 45 | 44 | 40 | |||||||||||||||
Margins and operating expenses as a % of total revenues: | ||||||||||||||||||||
Gross margin – total | 67.2 | % | 67.5 | % | 62.2 | % | 71.8 | % | 65.3 | % | ||||||||||
Gross margin – product & license fees | 69.7 | 73.9 | 64.3 | 83.4 | 68.9 | |||||||||||||||
Gross margin – services | 60.5 | 53.0 | 57.1 | 44.6 | 56.4 | |||||||||||||||
Research and development | 27.3 | 28.5 | 28.5 | 30.7 | 28.2 | |||||||||||||||
Sales and marketing | 16.6 | 14.9 | 14.2 | 14.0 | 16.0 | |||||||||||||||
General and administrative | 8.2 | 9.4 | 8.1 | 9.7 | 8.1 | |||||||||||||||
Operating income margin | 15.2 | 14.7 | 11.4 | 17.4 | 13.1 | |||||||||||||||
Net income margin | 12.4 | 10.7 | 8.9 | 13.0 | 10.9 | |||||||||||||||
Operating cash flow (in 000s) | $ | 5,765 | $ | 5,642 | $ | 116 | $ | 9,810 | $ | 18,099 | ||||||||||
Capital expenditures (in 000s) | $ | 1,066 | $ | 666 | $ | 1,322 | $ | 932 | $ | 735 | ||||||||||
Common stock outstanding (in 000s) | 38,920 | 38,722 | 38,436 | 38,362 | 47,158 | |||||||||||||||
Revenues from international markets: | 77 | % | 63 | % | 72 | % | 81 | % | 71 | % | ||||||||||
EMEA | 70 | % | 53 | % | 61 | % | 71 | % | 63 | % | ||||||||||
Asia/Pacific | 6 | % | 8 | % | 9 | % | 8 | % | 5 | % | ||||||||||
Other | 1 | % | 2 | % | 3 | % | 2 | % | 3 | % | ||||||||||
Top 10 customers as % of total revenues (3) | 66 | % | 71 | % | 60 | % | 69 | % | 71 | % | ||||||||||
| (1) | For the full year of 2003, revenues from wireless customers represented approximately 30% of total revenues compared to 26% in 2002. |
| (2) | During this period, one international fixed-line customer accounted for approximately 18% of total revenues and another international fixed-line customer accounted for approximately 16% of total revenues. |
| (3) | For the full year of 2003, revenues from the top 10 customers in the period represented approximately 60% of total revenues. |
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