Exhibit 99.1
[GRAPHIC OMITTED] PRESS RELEASE
NEOWARE REPORTS FISCAL 2004 AND FOURTH QUARTER
REVENUE AND EARNINGS
KING OF PRUSSIA, PA., AUGUST 5, 2004 -- Neoware Systems, Inc. (Nasdaq:
NWRE), the leading supplier of software, services and appliances for thin client
computing, today reported financial results for its fiscal fourth quarter and
year ended June 30, 2004.
FOR THE QUARTER ENDED JUNE 30, 2004:
o Revenues increased to a record $17,080,000 from $15,824,000 in the
prior year fourth quarter as a result of positive customer response to
the Company's new product and market strategies and increased sales
through IBM to large enterprise customers.
o Gross profit was $7,353,000, or 43% of revenue, compared to $7,491,000,
or 47% of revenue, in the prior year fourth quarter as a result of
higher enterprise sales and the introduction of new products designed
to build market share and expand the thin client segment of the PC
market.
o In June, 2004, the Company wrote off approximately $1.6 million in
deferred expenses for acquisitions that were determined to be unlikely
to be consummated in the near future. Excluding this charge, operating
expenses were $5,032,000, compared to $4,893,000 in the prior year and
$5,681,000 in the prior quarter, as the Company maintained control of
its expenditures.
o Excluding the write off of deferred acquisition cost and the associated
income tax benefit, net income was $1,536,000, or $.10 per diluted
share, compared to $1,701,000, or $.12 per diluted share, in the year
ago quarter. On a GAAP basis, net income was $477,000, or $.03 per
diluted share.
FOR THE FISCAL YEAR ENDED JUNE 30, 2004:
o Revenues increased to a record $63,165,000 from $57,522,000 in the
prior year.
o Excluding the write off of deferred acquisition cost and the associated
income tax benefit, net income was $6,453,000, or $.40 per diluted
share, compared to $6,312,000, or $.43 per diluted share, in the prior
year. On a GAAP basis, net income was $5,394,000, or $.34 per diluted
share
Accompanying this release is a schedule of a reconciliation of these
non-GAAP measures to GAAP financial measures presented in this release.
CUSTOMER HIGHLIGHTS
o Selected customers in the quarter included BMC Software, Computer
Sciences Corporation, Corestaff Services, CVS, Federated Department
Stores, Goodyear Tire and Rubber, Haven Healthcare Management,
Independence Air, Johnson and Johnson, Kansas Board of Public
Utilities, Kroger, Lockheed Martin, Meridian Health, National Asset
Recovery Services, Nike, Renault, Siemens Medical Systems, and
Wal-Mart.
"Our new operating plan is producing positive results, as evidenced by
our fourth quarter financials," stated Michael Kantrowitz, Neoware's Chairman
and CEO. "Record sales to large enterprise customers resulted in the highest
quarterly revenues we have ever delivered, and excluding the write-off of
acquisition expenses, the second highest net income we achieved this year. Our
alliance with IBM delivered substantial sales that were significantly higher
than in any previous period."
"During this year we faced challenges in our market and we responded by
introducing a number of new initiatives. We are now more proactive in our
marketing and selling efforts and have developed new products - including the
industry's only $199 thin client from a major provider - that are designed to
grow the thin client segment of the PC market and our share of it. While we are
disappointed that we spent resources this year on an acquisition that we did not
complete, we see a real opportunity to pursue acquisitions that we believe can
provide additional value for our shareholders. We have this opportunity because
our Company is solidly profitable, generated more than $10 million in cash this
fiscal year, and ended the year with more than $55 million in cash and short
term investments with virtually no debt - the strongest financial position ever
for Neoware."
"Looking forward, we project continued top line growth, driven by
increased sales of thin client appliances, as well as our TeemTalk and ThinPC
software, through IBM and our other channels. While our results may vary in any
given quarter, we are comfortable with current analyst revenue estimates of $70
to $71 million in the coming fiscal year, and believe that if we continue to see
positive results from our new product and marketing strategies we may be in a
position to raise this guidance in the future. We also believe that we can
achieve our existing estimate of 40% to 45% gross margins, and intend to drive
operating expenses below 30% as a percentage of revenue, generating improvements
in operating and net income. Based on these results, we are comfortable with
current analyst estimates of earnings between $.35 and $.42 per share for fiscal
2005, assuming 16 million fully diluted shares. The effects of potential
acquisitions that we are pursuing, should any be consummated, are not included
in these projections."
"Neoware's products are more secure, reliable, affordable and
manageable than personal computers, and they eliminate the obsolescence built
into traditional PCs. These benefits are increasingly known throughout our
potential customer base and we believe they will continue to drive acceptance of
our products and the financial performance of our Company," Mr. Kantrowitz
concluded.
UPCOMING INVESTOR EVENTS
Neoware plans to participate in the following investor events. Note
that dates are subject to change - please confirm via the Company's web site
closer to the event date.
Roth Capital Partners Technology Conference
New York, NY
September 13, 2004
AEA Classic
San Diego, CA
November 9-10, 2004
Neoware Annual Meeting
King of Prussia, PA
December 1, 2004
CONFERENCE CALL INFORMATION
In connection with this release, management of Neoware will host a
conference call at 5:00 PM Eastern Time on August 5, 2004. The conference call
will be available live at www.vcall.com and on the Neoware website at
www.neoware.com. To participate, go to the website 10 minutes prior to the call
to register, download and install any necessary audio software. If you are
unable to attend the live conference call, an Internet replay of the call will
be archived and available after the call. A copy of this press release
announcing the Company's earnings and other financial and statistical
information about the periods to be presented in the conference call will be
available on the Company's website at www.neoware.com.
The call will also be accessible by dialing 1.866.238.1636 for domestic
calls and +1.703.639.1160 for international calls. The conference ID will be
509420. A replay of the call will be available through August 14, 2004 by
dialing 1.888.266.2081 domestically and +1.703.925.2533 internationally.
Non-GAAP FINANCIAL MEASURES
In this earnings release and during our earnings conference call as described
above, we use or plan to discuss certain financial measures which are considered
non-GAAP financial measures. Generally, a non-GAAP financial measure is a
numerical measure of a company's performance, financial position or cash flows
that either excludes or includes amounts that are not normally excluded or
included in the most directly comparable measure calculated and presented in
accordance with generally accepted accounting principles in the United States,
or GAAP. A reconciliation between non-GAAP and GAAP measures can be found in the
accompanying schedule. Operating expenses for the fiscal year and fourth quarter
ended June 30, 2004 included a charge of $1,604,000, and net income included the
charge and an associated income tax benefit of $545,000, that resulted from the
write off of deferred expenses incurred over the last year in connection with
acquisitions that the Company determined to be unlikely to be consummated in the
near future. We have, therefore, provided the non-GAAP measures in order to
present information about the Company's financial performance without this
expense, as we believe it provides a more comparable view of the financial
performance of the Company's core business.
ABOUT NEOWARE
Neoware's software, services, and thin client appliances make computing
more secure, manageable, reliable and affordable by enabling global enterprises
to fully leverage server-based computing. By incorporating open, standards-based
technologies and eliminating the obsolescence that is built into standard PC
architectures, Neoware provides enterprises with increased flexibility and
choice, as well as lower up-front and total costs.
Neoware's software products enable enterprises to gain control of their
desktops, and to integrate mainframe, midrange, UNIX and Linux applications with
Windows(R) and the web. Neoware's thin client appliances enable enterprises to
run applications on servers, and display them across wired or wireless networks
on secure, managed, reliable appliances that cost as little as one fourth the
price of today's typical business PC.
Neoware's products are available worldwide from IBM, as well as from
select, knowledgeable resellers. More information about Neoware can be found on
the Web at http://www.neoware.com or via email at info@neoware.com. Neoware is
based in King of Prussia, PA.
# # #
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including statements
regarding: our new operating plan; our proactive marketing and sales efforts;
our new products designed to grow the thin client segment of the PC market and
our market share; our acquisition strategy to provide shareholder value;
expectations for fiscal year 2005 revenue of $70 to $71 million and the
possibility of raising this guidance, gross margins in the 40% to 45% range,
operating expenses at near current levels, and earnings per share in the range
of $0.35 to $0.42; the continued success of our IBM relationship; and the
benefits of our products driving our financial performance. These
forward-looking statements involve risks and uncertainties. Factors that could
cause actual results to differ materially from those predicted in such
forward-looking statements include, our ability to achieve our expectations for
our 2005 fiscal year, the timing and receipt of future orders, our timely
development and customers' acceptance of our products, pricing pressures, rapid
technological changes in the industry, growth of overall thin client sales
through the capture of a greater portion of the PC market, increased
competition, our continued ability to sell our products through IBM to its
customers; our ability to attract and retain qualified personnel, adverse
changes in customer order patterns, our ability to identify and successfully
consummate and integrate future acquisitions, adverse changes in general
economic conditions in the U. S. and internationally, risks associated with
foreign operations and political and economic uncertainties associated with
current world events. These and other risks are detailed from time to time in
Neoware's periodic reports filed with the Securities and Exchange Commission,
including, but not limited to, its reports on Form 10-K for the year ended June
30, 2003 and Form 10-Q for the quarter ended March 31, 2004.
Neoware, ThinPC, and TeemTalk are trademarks of Neoware Systems, Inc. All other
names products and services are trademarks or registered trademarks of their
respective holders.
CONTACT:
Investor Relations:
Cameron Associates
Kevin McGrath
(212) 245-8000 x 203
kevin@cameronassoc.com
Neoware Systems, Inc.
Keith Schneck, CFO
(610) 277-8300
invest@neoware.com
NEOWARE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
ASSETS JUNE 30, JUNE 30,
2004 2003
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 17,119 $ 26,014
Short-term investments 38,177 3,151
Accounts receivable, net 10,580 11,089
Inventories 795 772
Prepaid expenses and other 1,628 798
Deferred income taxes 643 946
---------------------------------
Total current assets 68,942 42,770
Property and equipment, net 509 572
Goodwill 17,466 8,943
Intangibles, net 3,545 2,091
Deferred income taxes 145 --
---------------------------------
$ 90,607 $ 54,376
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,685 $ 4,206
Accrued expenses 3,448 2,818
Capital lease obligations 7 7
Deferred revenue 739 464
---------------------------------
Total current liabilities 9,879 7,495
---------------------------------
Capital lease obligations 4 10
---------------------------------
Deferred revenue 235 227
---------------------------------
Deferred income taxes -- 17
---------------------------------
STOCKHOLDERS' EQUITY:
Common stock 16 14
Additional paid-in capital 71,718 44,215
Treasury stock (100) (100)
Other comprehensive income (loss) 936 (27)
Retained earnings 7,919 2,525
---------------------------------
Total stockholders' equity 80,489 46,627
---------------------------------
$ 90,607 $ 54,376
=================================
NEOWARE SYSTEMS, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Unaudited
Net revenues $ 17,080 $ 15,824 $ 63,165 $ 57,522
Cost of revenues 9,727 8,333 32,785 31,549
--------- --------- --------- ---------
Gross profit 7,353 7,491 30,380 25,973
--------- --------- --------- ---------
Sales and marketing 3,340 3,034 13,125 9,971
Research and development 678 536 2,798 1,837
General and administrative 1,014 1,323 5,476 4,326
Abandoned acquisition costs 1,604 -- 1,604 --
--------- --------- --------- ---------
Operating expenses 6,636 4,893 23,003 16,134
--------- --------- --------- ---------
Operating income 717 2,598 7,377 9,839
Translation adjustment (106) -- (106) --
Loss on investment -- -- -- (300)
Interest income, net 105 59 392 323
--------- --------- --------- ---------
Income before income taxes 716 2,657 7,663 9,862
Income taxes 239 956 2,269 3,550
--------- --------- --------- ---------
Net income $ 477 $ 1,701 $ 5,394 $ 6,312
========= ========= ========= =========
Basic earnings per share $ 0.03 $ 0.12 $ 0.34 $ 0.46
========= ========= ========= =========
Diluted earnings per share $ 0.03 $ 0.12 $ 0.34 $ 0.43
========= ========= ========= =========
Weighted average number of common
shares outstanding in basic
earnings per share computation 15,778 13,950 15,683 13,601
========= ========= ========= =========
Weighted average number of common
shares outstanding in diluted
earnings per share computation 16,142 14,647 16,020 14,695
========= ========= ========= =========
NEOWARE SYSTEMS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
THREE MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
2004 2003 2004 2003
-------- --------- -------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 477 $ 1,701 $ 5,394 $ 6,312
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation 53 84 261 296
Amortization of intangibles 268 139 1,049 538
Loss on investment -- -- -- 249
Stock option benefit on deferred income taxes 297 1,805 2,005 1,805
Deferred income tax benefit 141 (1,939) 141 640
Changes in operating assets and liabilities, net of
effect from acquisition-
(Increase) decrease in:
Accounts receivable 603 (1,773) 509 (1,568)
Inventories (47) 355 (22) 268
Prepaid expenses and other (589) 142 (820) (274)
Increase (decrease) in:
Accounts payable 581 775 1,478 1,095
Accrued expenses 467 668 629 685
Deferred revenue (2) 63 284 110
-------- --------- -------- ---------
Net cash provided by operating activities 2,249 2,020 10,908 10,156
-------- --------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of the TeemTalk software business -- -- (9,995) --
Purchases of short-term investments (5,992) (3,151) (39,470) (3,151)
Sales of short-term investments -- -- 4,444 --
Purchase of intangible assets 47 (125) --
Purchases of property and equipment (69) (47) (198) (154)
-------- --------- -------- ---------
Net cash used in investing activities (6,061) (3,151) (45,344) (3,305)
-------- --------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of capital leases (1) (202) (6) (250)
Proceeds from issuance of common stock, net of
expenses -- -- 24,609 --
Expenses for prior issuance of common stock -- -- (3) (122)
Exercise of stock options and warrants 50 263 884 2,241
Repayments of officer loans -- 254 -- 263
-------- --------- -------- ---------
Net cash provided by financing activities 49 315 25,484 2,132
-------- --------- -------- ---------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 59 -- 57 --
-------- --------- -------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,704) (816) (8,895) 8,983
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 20,823 26,830 26,014 17,031
-------- --------- -------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 17,119 $ 26,014 $ 17,119 $ 26,014
======== ========= ======== =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for income taxes $ (3) $ 896 $ 261 $ 976
Cash paid for interest $ 2 $ 6 $ 9 $ 32
NEOWARE SYSTEMS, INC
RECONCILIATION OF Non-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
Unaudited
THREE MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 2004 JUNE 30, 2004
------------------------------------------------- ------------------------------------------------
GAAP ADJUSTMENT Non-GAAP GAAP ADJUSTMENTS Non-GAAP
------------------------------------------------- ------------------------------------------------
Net income $ 477 $ 1,059 A $ 1,536 $ 5,394 $ 1,059 A $ 6,453
Basic earnings per share $ 0.03 $ 0.07 $ 0.10 $ 0.34 $ 0.07 $ 0.41
Diluted earnings per share $ 0.03 $ 0.07 $ 0.10 $ 0.34 $ 0.07 $ 0.40
FOOTNOTES:
A - Abandoned acquisition cost, net of income tax benefit