|
Contact Information: | |
Scott C. McDonald | Karin Reak |
President & Chief Executive Officer | Director of Marketing |
Tel 408-852-8009 | Tel 408-852-8034 |
Fax 408-852-8109 | Fax 408-852-8134 |
smcdonald@castelle.com | kreak@castelle.com |
FOR IMMEDIATE RELEASE | FEBRUARY 16, 2007 |
Castelle Reports Financial Results for Fourth Quarter and Full Year 2006 MORGAN HILL, CA – February 16, 2007 – Castelle® (Nasdaq: CSTL), a leader in ‘all-in-one’ network fax solutions for the business and enterprise markets, today announced financial results for the Company’s fourth quarter and full fiscal year ended December 31, 2006. Revenues for the fourth quarter ended December 31, 2006, totaled $2.57 million, down 4% from $2.69 million in the fourth quarter of 2005. Net income for the fourth quarter of 2006 was $260,000, or $0.06 per fully diluted share, compared to a net loss of $120,000, or $0.03 per fully diluted share, in the fourth quarter of 2005, which included a tax provision of $395,000, or $0.10 per fully diluted share. Revenues for the full year ended December 31, 2006 totaled $10.59 million, down 2% from $10.83 million in 2005. Net income for fiscal 2006 was $669,000, or $0.15 per fully diluted share, up 16% from $579,000, or $0.13 per fully diluted share, in 2005, which included the tax provision as stated above. The Company recognized share-based payment expenses of $109,000 and $345,000 in the fourth quarter and fiscal 2006, respectively. No comparable expenses were included in 2005. Castelle increased its cash position by 22% during 2006, reporting cash and cash equivalents of $8.26 million as of December 31, 2006, compared to $6.77 million as of December 31, 2005. The cash and cash equivalents at the end of 2006 amounted to $1.85 per fully diluted share. The company remains free of long-term debt. “We look back on 2006 as a year of steady progress for Castelle and its fax server family,” said Scott McDonald, President and CEO of Castelle. “We made a strategic shift in our product mix with the introduction of FaxPress Premier™, FaxPress Enterprise™ and, most recently, FaxPress Enterprise Redundant fax servers, which collectively accounted for more than 55% of Castelle’s fax server installations. We are seeing an increase in enterprise-level installations as fax is becoming mission critical for many companies, and intend to introduce our newest generation of IP fax servers next month at the Spring VON show. Castelle’s new IP fax servers will enable customers to employ faxing in a VoIP environment and dramatically reduce the cost of large scale fax applications. This ongoing transition clearly highlights our success in meeting customer needs in their evolving network infrastructures. Looking ahead at 2007, I believe we are well positioned for top line growth.” |
Use of Pro Forma Operating Results Castelle’s GAAP results reflect the adoption of SFAS No. 123R, effective January 1, 2006. On a non-GAAP basis, net income, excluding share-based payment expenses, was $369,000 for the fourth quarter of 2006 and $1.01 million for the full year, compared to reported net loss of $120,000 in the fourth quarter of 2005 and net income of $579,000 for all of 2005. Prior to 2006, Castelle did not report share-based payments in the determination of its GAAP operating results. Castelle discloses non-GAAP financial measures of net income and net income per share and believes that this non-GAAP information provides historical comparability of its operating results over multiple reporting periods due to the absence of share-based payment expenses in comparative prior year periods. These non-GAAP financial measures should not be considered an alternative to earnings and earnings per share presented in conformity with U.S. GAAP. Further, these non-GAAP financial measures are unlikely to be comparable to non-GAAP information provided by other companies. In accordance with SEC regulations, reconciliation of the Castelle statements of earnings to the non-GAAP information is provided in the tables attached to this press release. About Castelle Castelle (Nasdaq: CSTL), a market leader in ’all-in-one’ network fax solutions for business and enterprise, offers organizations every possible network fax option: desktop faxing, production faxing, fax and email integration, workflow application integration, and tools for developing custom fax applications. FaxPress™, FaxPress Premier™ and FaxPress Enterprise™ network fax servers include the FaxPress or FaxPress Plus™ software suite that enables administrators and users to perform functions such as managing fax queues, creating reports, and viewing fax archives. Castelle products are designed to be easy to use and maintain, and provide an economical way for companies to share resources over the network. Castelle was founded in 1987 and is headquartered in Morgan Hill, California. Its products are available through a worldwide network of distributors, resellers, and online retailers. Visit Castelle online at www.castelle.com. FaxPress™, FaxPress Premier™, FaxPress Enterprise™ and FaxPress Plus™ are trademarks of Castelle. If you would like to be added to Castelle’s investor email list, please contact Karin Reak at kreak@castelle.com. Forward-Looking Statements This press release may contain forward-looking statements, including but not limited to references to revenue growth, long-term growth prospects and our ability to successfully expand our product offerings to penetrate new and current markets. These statements are subject to risks and uncertainties, including but not limited to the impact on our results from fluctuations in demand for our products, our ability to maintain and increase market share, the timely development, acceptance and pricing of our products, our ability to deliver our newest generation of IP fax servers at the VON show due to delays in product development, the impact on EPS from future non-cash tax provisions or benefits and general economic conditions as they affect our customers. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements as contained in our reports to the Securities and Exchange Commission, including our Forms 10-K and 10-Q. The Company assumes no obligation to update the forward-looking information. |
CASTELLE |
Condensed Consolidated Statements of Operations |
(in thousands, except per share data) |
(Unaudited) |
Three Months Ended | Twelve Months Ended | |||||||||||
December 31, 2006 | December 31, 2005 | December 31, 2006 | December 31, 2005 | |||||||||
Revenues: | ||||||||||||
Products | $ | 1,697 | $ | 1,936 | $ | 7,253 | $ | 7,891 | ||||
Services | 874 | 755 | 3,337 | 2,941 | ||||||||
Total net revenues | 2,571 | 2,691 | 10,590 | 10,832 | ||||||||
Cost of revenues: | ||||||||||||
Products | 731 | 706 | 2,931 | 2,694 | ||||||||
Services | 225 | 257 | 1,025 | 1,035 | ||||||||
Total cost of revenues | 956 | 963 | 3,956 | 3,729 | ||||||||
Gross profit | 1,615 | 1,728 | 6,634 | 7,103 | ||||||||
Operating expenses: | ||||||||||||
Research and development | 416 | 431 | 1,782 | 1,683 | ||||||||
Sales and marketing | 561 | 644 | 2,502 | 2,506 | ||||||||
General and administrative | 433 | 412 | 1,931 | 2,045 | ||||||||
Total operating expenses | 1,410 | 1,487 | 6,215 | 6,234 | ||||||||
Operating income | 205 | 241 | 419 | 869 | ||||||||
Other income, net | 84 | 34 | 279 | 105 | ||||||||
Income before income taxes | 289 | 275 | 698 | 974 | ||||||||
Provision for income taxes | 29 | 395 | 29 | 395 | ||||||||
Net income | $ | 260 | $ | (120 | ) | $ | 669 | $ | 579 | |||
Net income per common share : | ||||||||||||
Basic | $ | 0.06 | $ | (0.03 | ) | $ | 0.17 | $ | 0.15 | |||
Diluted | $ | 0.06 | $ | (0.03 | ) | $ | 0.15 | $ | 0.13 | |||
Shares used in per share calculation: | ||||||||||||
Basic | 4,040 | 3,984 | 4,023 | 3,904 | ||||||||
Diluted | 4,468 | 3,984 | 4,475 | 4,488 | ||||||||
CASTELLE |
GAAP to Pro Forma Reconciliation of Statements of Operations |
Excluding 123R Share Based Payment Expenses |
(in thousands, except per share data) |
(Unaudited) |
Three Months Ended December 31, 2006 | Twelve Months Ended December 31, 2006 | |||||||||||||||||
GAAP | Share based payment expenses | Pro forma | GAAP | Share based payment expenses | Pro forma | |||||||||||||
Revenues: | ||||||||||||||||||
Products | $ | 1,697 | $ | — | $ | 1,697 | $ | 7,253 | $ | — | $ | 7,253 | ||||||
Services | 874 | — | 874 | 3,337 | — | 3,337 | ||||||||||||
Total net revenues | 2,571 | — | 2,571 | 10,590 | — | 10,590 | ||||||||||||
Cost of revenues: | ||||||||||||||||||
Products | 731 | (7 | ) | 724 | 2,931 | (13 | ) | 2,918 | ||||||||||
Services | 225 | (10 | ) | 215 | 1,025 | (34 | ) | 991 | ||||||||||
Cost of revenues | 956 | (17 | ) | 939 | 3,956 | (47 | ) | 3,909 | ||||||||||
Gross profit | 1,615 | 17 | 1,632 | 6,634 | 47 | 6,681 | ||||||||||||
Operating expenses: | ||||||||||||||||||
Research and development | 416 | (41 | ) | 375 | 1,782 | (122 | ) | 1,660 | ||||||||||
Sales and marketing | 561 | (11 | ) | 550 | 2,502 | (35 | ) | 2,467 | ||||||||||
General and administrative | 433 | (40 | ) | 393 | 1,931 | (141 | ) | 1,790 | ||||||||||
Total operating expenses | 1,410 | (92 | ) | 1,318 | 6,215 | (298 | ) | 5,917 | ||||||||||
Operating income | 205 | 109 | 314 | 419 | 345 | 764 | ||||||||||||
Other income, net | 84 | — | 84 | 279 | — | 279 | ||||||||||||
Income before income taxes | 289 | 109 | 398 | 698 | 345 | 1,043 | ||||||||||||
Provision for income taxes | 29 | — | 29 | 29 | — | 29 | ||||||||||||
Net income | $ | 260 | $ | 109 | $ | 369 | $ | 669 | $ | 345 | $ | 1,014 | ||||||
Net income per common share: | ||||||||||||||||||
Basic | $ | 0.06 | $ | 0.03 | $ | 0.09 | $ | 0.17 | $ | 0.08 | $ | 0.25 | ||||||
Diluted | $ | 0.06 | $ | 0.02 | $ | 0.08 | $ | 0.15 | $ | 0.08 | $ | 0.23 | ||||||
Shares used in per share calculation: | ||||||||||||||||||
Basic | 4,040 | 4,040 | 4,023 | 4,023 | ||||||||||||||
Diluted | 4,468 | 4,468 | 4,475 | 4,475 | ||||||||||||||
CASTELLE |
Condensed Consolidated Balance Sheets |
(in thousands, except per share data) |
(Unaudited) |
December 31, 2006 | December 31, 2005 | |||||
---|---|---|---|---|---|---|
Assets: | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 8,259 | $ | 6,766 | ||
Accounts receivable, net | 932 | 1,137 | ||||
Inventories | 1,016 | 1,156 | ||||
Prepaid expenses and other current assets | 238 | 135 | ||||
Deferred taxes | 185 | 212 | ||||
Total current assets | 10,630 | 9,406 | ||||
Property and equipment, net | 280 | 200 | ||||
Other assets | 125 | 140 | ||||
Deferred taxes | 944 | 928 | ||||
Total assets | $ | 11,979 | $ | 10,674 | ||
Liabilities and Shareholders’ Equity | ||||||
Current liabilities: | ||||||
Short-term debt | $ | — | $ | 14 | ||
Accounts payable | 349 | 286 | ||||
Accrued liabilities | 825 | 824 | ||||
Deferred revenue | 1,710 | 1,498 | ||||
Total current liabilities | 2,884 | 2,622 | ||||
Long-term debt | — | — | ||||
Total liabilities | 2,884 | 2,622 | ||||
Shareholders’ equity | 9,095 | 8,052 | ||||
Total liabilities and shareholders’ equity | $ | 11,979 | $ | 10,674 | ||
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