Media Contact: Christy Lynch Voltaire Tel. +1 978 439 5407 christyl@voltaire.com | Investor Relations Contact: Ehud Helft / Fiona Darmon CCGK Investor Relations Tel. +1 646 797 2868 / +972 54 566 3221 info@gkir.com |
FOR IMMEDIATE RELEASE:
Voltaire Presents Third Quarter 2008 Financial Results
Quarterly revenues of $14.7 million; Gross margin totals 54.5%
Continues to generate cash with $1.4 million sequential increase in cash balances
BILLERICA, Mass. and HERZLIYA, Israel – October 29, 2008 – Voltaire Ltd. (NASDAQ: VOLT), a leading provider of grid backbone solutions for data centers, today announced financial results for the three-month period ended September 30, 2008.
Financial Highlights
| o | Revenues total $14.7 million; Nine-month revenues increase 35% YoY to $48.4 million |
| o | Gross margin for third quarter of 2008 increases to 54.5%, compared to 43.6% in third quarter 2007 |
| o | Non-GAAP third quarter of 2008 net loss totals $443 thousand; GAAP quarterly net loss totals $918 thousand |
| o | Cash and equivalents at September 30, 2008 reach $58.0 million, up from $56.6 million at June 30, 2008 |
Revenues for the third quarter of 2008 totaled $14.7 million, compared to $15.5 million in the third quarter of 2007, in line with the preliminary results issued by the Company on October 7, 2008.
Gross profit for the third quarter of 2008 totaled $8.0 million, an increase of 18% compared to $6.8 million in the third quarter of 2007. Gross margin for the third quarter of 2008 reached 54.5%, a substantial improvement from the 43.6% gross margin for the third quarter of 2007.
Operating loss for the third quarter of 2008 totaled $1.2 million, compared to operating profit of $0.2 million in the third quarter of 2007. Net loss for the third quarter of 2008 totaled $0.9 million, or a $0.04 loss per share, compared to a net loss, after non-cash accretion of redeemable preferred shares, of $18.3 million, or a $1.25 loss per share, in the third quarter of 2007.
Operating loss, on a non-GAAP basis, for the third quarter of 2008 totaled $0.7 million, compared to a non-GAAP operating profit of $0.5 million in the third quarter of 2007. Net loss, on a non-GAAP basis, for the third quarter of 2008 totaled $0.4 million, or a $0.02 loss per share, compared to a non-GAAP net profit of $0.8 million, or $0.04 per share, in the third quarter of 2007.
Cash, cash equivalents, and marketable bonds and securities as of September 30, 2008 totaled $58.0 million, compared to $56.6 million as of June 30, 2008.
Mr. Ronnie Kenneth, Chairman and CEO of Voltaire commented, "The third quarter was characterized by important business achievements, confounded by the impact of the turbulent capital markets on certain of our customers. We are disappointed with the lower than anticipated revenues and the resulting loss, however continue to be encouraged by our business progress in terms of new partnerships and product launches."
"Several weeks ago Oracle and HP launched their new Database Machine based on Voltaire InfiniBand, which provides unprecedented performance for large Oracle database environments. This is a major achievement for us as Oracle is now selling Voltaire hardware as part of their solution and every system that ships will include Voltaire switches. Furthermore, this quarter we continued to broaden our product portfolio with the launch of the 40 Gbps QDR InfiniBand switching platform,” added Mr. Kenneth. "Moving ahead, as we enter these challenging times, we intend to continue to leverage our three pronged growth strategy - our vertical market approach, OEM partnerships, and leading and differentiated products - paired with our strong cash position, to identify and meet new growth opportunities."
Outlook
In light of the current operating environment, management expects revenues for the fourth quarter of 2008 to be in the range of $14.0 - $16.0 million, resulting in expected revenues for full year 2008 in the range of $62.4 - $64.4 million, an increase of 17% - 21% over full year 2007. Loss per share, on a non-GAAP basis, in the fourth quarter 2008 is expected to be in the range of $0.08 - $0.02 per share.
Conference Call Details
The Company will be hosting a conference call later today, at 10:00 am ET. On the call, management will review and discuss the results and will be available to answer questions. To participate, please either call one of the following teleconferencing numbers, or access the live webcast on the Company’s website. Please begin placing your calls at least 10 minutes before the conference call is due to commence. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Number: | 1-866-345-5855 | | UK Dial-in Number: | 0-800-404-8418 |
Israel Dial-in Number: | 03-918-0609 | | International Dial-in Number: | +972-3-918-0609 |
at 10:00 am Eastern Time; 7:00 am Pacific Time; 2:00 pm UK Time; 4:00 pm Israel Time
The conference call will be broadcast live on the Company’s website. To participate, please access the investor relations section of Voltaire’s website – www.voltaire.com, at least 10 minutes before the conference call is due to commence. A replay of the call will be available starting several hours following the call. The replay will be accessible under the Investor Relations section website at: www.voltaire.com.
Use of Non-GAAP Financial Measure
Voltaire reports its results of operations in accordance with GAAP and, additionally, on a non-GAAP basis. Non-GAAP operating income (loss) and non-GAAP net income (loss) are calculated based on the operating income (loss) or net income (loss) in Voltaire’s financial statements excluding (i) non-cash equity-based compensation charges recorded in accordance with SFAS 123R, (ii) the non-cash expense recorded in relation to the accretion of redeemable convertible preferred shares, (iii) the non-cash expense related to changes in fair value of outstanding warrants, (iv) the amortization of deferred charges on these warrants and (v) the $2.1 million expense recorded in the first quarter of 2008 under cost of revenues for the one-time repayment of grants to the Office of the Israeli Chief Scientist. Reconciliation of this non-GAAP measure to operating income (loss) and net income (loss), the most comparable GAAP measures, is provided in the schedules attached to this release. Voltaire provides these non-GAAP financial measures because its management believes that they are useful in enhancing an understanding of the Voltaire’s ongoing performance. Voltaire uses internally the Non-GAAP information to evaluate the Company’s ongoing performance. Voltaire is providing this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results.
Accretion of Redeemable Convertible Preferred Shares
The charge for the accretion of redeemable convertible preferred shares represents a non-cash charge to the income statement because preferred shareholders had the option to put their shares back to the company at the shares’ current fair market value. As the put option was eliminated when the shares converted into ordinary shares at the IPO, the charge in 2007 represents the change in value of those preferred shares accrued through to the date of the Company’s initial public offering, July 25, 2007, based upon the IPO valuation. The entire balance in temporary equity has now been rolled into additional paid in capital on the balance sheet.
About Voltaire
Voltaire (NASDAQ: VOLT) designs and develops server and storage switching and software solutions that enable high-performance grid computing within the data center. Voltaire refers to its server and storage switching and software solutions as the Voltaire Grid Backbone™. Voltaire’s products leverage InfiniBand technology and include director-class switches, multi-service switches, fixed-port configuration switches, Ethernet and Fibre Channel routers and standards-based driver and management software. Voltaire’s solutions have been sold to a wide range of end customers including governmental, research and educational organizations, as well as enterprises in the manufacturing, oil and gas, entertainment, life sciences and financial services industries.
Founded in 1997, Voltaire Ltd. is headquartered in Herzliya, Israel, and has its U.S. headquarters in Billerica, Massachusetts.
Forward Looking Statements
Information provided in this press release may contain statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the Voltaire's plans, objectives and expectations for future operations and are based upon management's current estimates and projections of future results or trends. In particular, Voltaire has provided an outlook on its projects results of operations. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. These factors include, but are not limited to, those discussed under the heading "Risk Factors" in Voltaire’s annual report on Form 20-F filed with the Securities and Exchange Commission on May 5, 2008. In addition to those risks, the recent sub-prime mortgage crisis in the United States and the resulting financial crisis have directly impacted a number of financial institution customers, as well as customers in range of other industries. We face the risk that our clients may cancel existing orders or delay or fail to place projected orders due to the current financial situation. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
- Financial Tables -
VOLTAIRE LTD.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
| | | September 30, | | December 31, | |
| | | 2008 | | 2007 | |
| | | (unaudited) | | (audited) | |
ASSETS | | | | | | | |
| | | | | | | | |
CURRENT ASSETS: | | | | | | | |
| Cash and cash equivalents | | $ | 29,931 | | $ | 52,239 | |
| Available for sale marketable securities | | | 23,324 | | | 6,142 | |
| Restricted deposit | | | 1,354 | | | - | |
| Accounts receivable: | | | | | | | |
| Trade | | | 10,611 | | | 9,772 | |
| Other | | | 1,911 | | | 1,390 | |
| Deferred cost | | | 268 | | | 672 | |
| Inventories | | | 5,939 | | | 5,683 | |
| Total current assets | | | 73,338 | | | 75,898 | |
NON CURRENT ASSETS: | | | | | | | |
| Restricted long-term deposits | | | 245 | | | 241 | |
| Long-term deposits | | | 178 | | | 160 | |
| Available for sale marketable securities | | | 4,761 | | | 995 | |
| Deferred income taxes | | | 844 | | | 967 | |
| Funds in respect of employee rights upon retirement | | | 1,899 | | | 1,252 | |
| | | | 7,927 | | | 3,615 | |
PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization | | | 3,334 | | | 3,010 | |
| Total assets | | $ | 84,599 | | $ | 82,523 | |
| | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | |
CURRENT LIABILITIES: | | | | | | | |
| Accounts payable and accruals: | | | | | | | |
| Trade | | $ | 7,755 | | $ | 6,364 | |
| Other | | | 5,518 | | | 6,134 | |
| Deferred revenues | | | 4,491 | | | 3,792 | |
| Total current liabilities | | | 17,764 | | | 16,290 | |
LONG-TERM LIABILITIES: | | | | | | | |
| Accrued severance pay | | | 2,842 | | | 2,006 | |
| Deferred revenues | | | 3,286 | | | 2,524 | |
| Total long-term liabilities | | | 6,128 | | | 4,530 | |
| Total liabilities | | | 23,892 | | | 20,820 | |
| | | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | | |
| Ordinary shares of NIS 0.01 par value | | | 2,787 | | | 2,786 | |
| Additional Paid-in capital | | | 148,811 | | | 147,194 | |
| Accumulated other comprehensive income | | | (24 | ) | | (4 | ) |
| Accumulated deficit | | | (90,867 | ) | | (88,273 | ) |
| Total shareholders’ equity | | | 60,707 | | | 61,703 | |
| Total liabilities and shareholders’ equity | | $ | 84,599 | | $ | 82,523 | |
VOLTAIRE LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except per share data)
| | | Three months ended September 30, | | Nine months ended September 30, | |
| | | 2008 | | 2007 | | 2008 | | 2007 | |
| | | (unaudited) | | (unaudited) | |
REVENUES | | $ | 14,666 | | $ | 15,500 | | $ | 48,381 | | $ | 35,746 | |
COST OF REVENUES | | | 6,679 | | | 8,743 | | | 25,085 | | | 21,183 | |
GROSS PROFIT | | | 7,987 | | | 6,757 | | | 23,296 | | | 14,563 | |
OPERATING EXPENSES: | | | | | | | | | | | | | |
| Research and development | | | 3,914 | | | 2,484 | | | 11,051 | | | 7,724 | |
| Sales and marketing | | | 3,350 | | | 2,696 | | | 10,046 | | | 7,210 | |
| General and administrative | | | 1,890 | | | 1,386 | | | 5,441 | | | 3,367 | |
| Total operating expenses | | | 9,154 | | | 6,566 | | | 26,538 | | | 18,301 | |
INCOME (LOSS) FROM OPERATION | | | (1,167 | ) | | 191 | | | (3,242 | ) | | (3,738 | ) |
FINANCIAL INCOME (EXPENSES), net | | | 326 | | | 34 | | | 1,147 | | | (354 | ) |
INCOME (LOSS) BEFORE TAX | | | (841 | ) | | 225 | | | (2,095 | ) | | (4,092 | ) |
TAX EXPENSES | | | (77 | ) | | (91 | ) | | (499 | ) | | (226 | ) |
NET INCOME (LOSS) before accretion of redeemable convertible preferred shares | | $ | (918 | ) | $ | 134 | | $ | (2,594 | ) | $ | (4,318 | ) |
| | | | | | | | | | | | | | |
| Accretion of redeemable convertible preferred shares | | | - | | | (17,355 | ) | | - | | | (23,608 | ) |
| Charge for beneficial conversion feature of series D and D2 redeemable convertible preferred shares | | | - | | | (1,088 | ) | | - | | | (1,386 | ) |
NET LOSS ATTRIBUTABLE TO ORDINARY SHAREHOLDERS | | $ | (918 | ) | $ | (18,309 | ) | $ | (2,594 | ) | $ | (29,312 | ) |
| | | | | | | | | | | | | | |
Net loss per share attributable to ordinary shareholders: | | | | | | | | | | | | | |
| Basic | | $ | (0.04 | ) | $ | (1.25 | ) | $ | (0.13 | ) | $ | (5.45 | ) |
| Diluted | | $ | (0.04 | ) | $ | (1.25 | ) | $ | (0.13 | ) | $ | (5.45 | ) |
Weighted average number of ordinary shares: | | | | | | | | | | | | | |
| Basic | | | 20,898,748 | | | 14,609,125 | | | 20,724,708 | | | 5,374,898 | |
| Diluted | | | 20,898,748 | | | 14,609,125 | | | 20,724,708 | | | 5,374,898 | |
VOLTAIRE LTD.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except per share data)
| | | Three months ended September 30, | | Nine months ended September 30, | |
| | | 2008 | | 2007 | | 2008 | | 2007 | |
| | | (unaudited) | | (unaudited) | |
| | | | | | | | | | | | | | |
REVENUES | | $ | 14,666 | | $ | 15,500 | | $ | 48,381 | | $ | 35,746 | |
COST OF REVENUES | | | 6,674 | | | 8,743 | | | 22,996 | | | 21,183 | |
GROSS PROFIT | | | 7,992 | | | 6,757 | | | 25,385 | | | 14,563 | |
OPERATING EXPENSES: | | | | | | | | | | | | | |
| Research and development | | | 3,818 | | | 2,434 | | | 10,793 | | | 7,613 | |
| Sales and marketing | | | 3,228 | | | 2,627 | | | 9,715 | | | 7,059 | |
| General and administrative | | | 1,638 | | | 1,164 | | | 4,742 | | | 2,869 | |
| Total operating expenses | | | 8,684 | | | 6,225 | | | 25,250 | | | 17,541 | |
PROFIT (LOSS) FROM OPERATION | | | (692 | ) | | 532 | | | 135 | | | (2,978 | ) |
FINANCIAL INCOME , net | | | 326 | | | 320 | | | 1,147 | | | 316 | |
INCOME (LOSS) BEFORE TAX | | | (366 | ) | | 852 | | | 1,282 | | | (2,662 | ) |
TAX EXPENSES | | | (77 | ) | | (91 | ) | | (499 | ) | | (226 | ) |
NET INCOME (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS | | $ | (443 | ) | $ | 761 | | $ | 783 | | $ | (2,888 | ) |
| | | | | | | | | | | | | | |
Net income (loss) per share attributable to ordinary shareholders: | | | | | | | | | | | | | |
| Basic | | $ | (0.02 | ) | $ | 0.04 | | $ | 0.04 | | $ | (0.18 | ) |
| Diluted | | $ | (0.02 | ) | $ | 0.04 | | $ | 0.03 | | $ | (0.18 | ) |
Weighted average number of ordinary shares: | | | | | | | | | | | | | |
| Basic | | | 20,898,748 | | | 18,550,562 | | | 20,724,708 | | | 15,690,516 | |
| Diluted | | | 20,898,748 | | | 20,714,170 | | | 22,630,255 | | | 15,690,516 | |
VOLTAIRE LTD.
RECONCILIATION BETWEEN GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except per share data)
| | | Three months ended September 30, 2008 | | Nine months ended September 30, 2008 | |
| | | GAAP | | Adj. | | NON-GAAP | | GAAP | | Adj. | | NON-GAAP | |
| | | (unaudited) | | (unaudited) | |
| | | | | | | | | | | | | | | | | | | | |
REVENUES | | $ | 14,666 | | | | | $ | 14,666 | | $ | 48,381 | | | | | $ | 48,381 | |
| | | | | | | | | | | | | | | | | | | | |
COST OF REVENUES (1) ,(2) | | | 6,679 | | | (5 | ) | | 6,674 | | | 25,085 | | | (2,089 | ) | | 22,996 | |
GROSS PROFIT | | | 7,987 | | | 5 | | | 7,992 | | | 23,296 | | | 2,089 | | | 25,385 | |
OPERATING EXPENSES: | | | | | | | | | | | | | | | | | | | |
| Research and development (2) | | | 3,914 | | | (96 | ) | | 3,818 | | | 11,051 | | | (258 | ) | | 10,793 | |
| Sales and marketing (2) | | | 3,350 | | | (122 | ) | | 3,228 | | | 10,046 | | | (331 | ) | | 9,715 | |
| General and administrative (2) | | | 1,890 | | | (252 | ) | | 1,638 | | | 5,441 | | | (699 | ) | | 4,742 | |
| Total operating expenses | | | 9,154 | | | (470 | ) | | 8,684 | | | 26,538 | | | (1,288 | ) | | 25,250 | |
PROFIT (LOSS) FROM OPERATION | | | (1,167 | ) | | 475 | | | (692 | ) | | (3,242 | ) | | 3,377 | | | 135 | |
FINANCIAL INCOME, net | | | 326 | | | | | | 326 | | | 1,147 | | | | | | 1,147 | |
INCOME (LOSS) BEFORE TAX | | | (841 | ) | | 475 | | | (366 | ) | | (2,095 | ) | | 3,377 | | | 1,282 | |
TAX EXPENSES | | | (77 | ) | | | | | (77 | ) | | (499 | ) | | | | | (499 | ) |
NET INCOME (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS | | $ | (918 | ) | | 475 | | $ | (443 | ) | $ | (2,594 | ) | | 3,377 | | $ | 783 | |
| | | | | | | | | | | | | | | | | | | | |
Net income (loss) per share attributable to ordinary shareholders: | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | (0.04 | ) | | | | $ | (0.02 | ) | $ | (0.13 | ) | | | | $ | 0.04 | |
| Diluted | | $ | (0.04 | ) | | | | $ | (0.02 | ) | $ | (0.13 | ) | | | | $ | 0.03 | |
Weighted average number of ordinary shares: | | | | | | | | | | | | | | | | | | | |
| Basic | | | 20,898,748 | | | | | | 20,898,748 | | | 20,724,708 | | | | | | 20,724,708 | |
| Diluted | | | 20,898,748 | | | | | | 20,898,748 | | | 20,724,708 | | | | | | 22,630,255 | |
(1) Adjustment related to termination of the participation in the Chief Scientist grant program.
(2) Adjustments related to share-based compensation expenses.
VOLTAIRE LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
| | | Three months ended September 30, | | Nine months ended September 30, | |
| | | 2008 | | 2007 | | 2008 | | 2007 | |
| | | (unaudited) | | (unaudited) | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | | | | | |
| Net loss, before accretion of redeemable convertible preferred shares | | $ | (918 | ) | $ | 134 | | $ | (2,594 | ) | $ | (4,318 | ) |
| Adjustments required to reconcile net loss to net cash used in (provide by) operating activities: | | | | | | | | | | | | | |
| Depreciation and amortization | | | 365 | | | 269 | | | 1,024 | | | 669 | |
| Deferred income taxes | | | 31 | | | - | | | 92 | | | - | |
| Change in accrued severance pay | | | 166 | | | 226 | | | 836 | | | 402 | |
| Non-cash share-based compensation expenses | | | 475 | | | 341 | | | 1,305 | | | 760 | |
| Amortization of deferred charges | | | - | | | 288 | | | - | | | 346 | |
| Revaluation of warrant liabilities | | | - | | | (2 | ) | | - | | | 324 | |
| Changes in operating asset and liability items: | | | | | | | | | | | | | |
| Decrease (increase) in accounts receivable | | | 2,649 | | | 3,746 | | | (961 | ) | | 4,804 | |
| Increase (decrease) in accounts payable and accruals | | | 1,928 | | | (5,711 | ) | | 2,233 | | | (5,486 | ) |
| Decrease (increase) in inventories | | | (1,625 | ) | | 952 | | | (256 | ) | | (4,398 | ) |
| Net cash used in (provide by) operating activities | | | 3,071 | | | 243 | | | 1,679 | | | (6,897 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | | | | |
| Restricted cash | | | (853 | ) | | - | | | (1,354 | ) | | - | |
| Purchase of property and equipment | | | (699 | ) | | (693 | ) | | (1,436 | ) | | (1,902 | ) |
| Investment in marketable securities | | | (26,918 | ) | | - | | | (61,150 | ) | | - | |
| Proceeds from sale of marketable securities | | | 21,037 | | | - | | | 40,305 | | | - | |
Amounts funded in respect of employee rights upon retirement | | | (139 | ) | | (173 | ) | | (647 | ) | | (235 | ) |
| Increase in long-term deposits | | | (1 | ) | | (12 | ) | | (18 | ) | | (12 | ) |
| Net cash used in investing activities | | | (7,573 | ) | | (878 | ) | | (24,300 | ) | | (2,149 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | | | | |
| Proceeds from initial public offering, net of issuance costs | | | - | | | 46,209 | | | - | | | 46,209 | |
| Proceeds from exercise of options | | | 8 | | | 37 | | | 313 | | | 136 | |
| Principal payment on loan | | | - | | | (5,000 | ) | | - | | | (5,000 | ) |
| Issuance of redeemable convertible preferred shares, net of issuance expenses | | | - | | | - | | | - | | | 11,374 | |
| Net cash provided by financing activities | | | 8 | | | 41,246 | | | 313 | | | 52,719 | |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | | (4,494 | ) | | 40,611 | | | (22,308 | ) | | 43,673 | |
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | | | 34,425 | | | 13,299 | | | 52,239 | | | 10,237 | |
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD | | | 29,931 | | $ | 53,910 | | | 29,931 | | $ | 53,910 | |
| | | | | | | | | | | | | | |
Supplemental disclosure of non-cash activities: | | | | | | | | | | | | | |
| Cumulative adjustment from adoption of FIN 48 | | $ | - | | $ | - | | $ | - | | $ | 221 | |
| Accrued expenses related to IPO | | $ | - | | $ | 508 | | $ | - | | $ | 508 | |
| Conversion of redeemable convertible preferred shares to ordinary shares | | $ | - | | $ | 99,958 | | $ | - | | $ | 99,958 | |
| Conversion of warrants on of redeemable convertible preferred shares to warrants on ordinary shares | | $ | - | | $ | 1,019 | | $ | - | | $ | 1,019 | |
