FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT:
David Brunton, Chief Financial Officer
SBE, Inc.
(925) 355-7700
davidb@sbei.com
SBE, INC. REPORTS THIRD QUARTER 2004 RESULTS
REVENUES JUMP 81% YEAR OVER YEAR
SAN RAMON, CA -- AUGUST 25, 2004 -- SBE, Inc. (Nasdaq:SBEI), a leading provider
of high performance OEM network connectivity solutions, today reported results
for the three-month and nine-month periods ended July 31, 2004.
Net sales for the third quarter of 2004 were $2.9 million, compared with $1.6
million for the third quarter ended July 31, 2003. Net income for the third
quarter of 2004 was $79,000, or $0.02 and $0.01 per share, basic and diluted,
compared to net income for the third quarter of 2003 of $141,000, or $0.03 per
share, basic and diluted.
Net sales for the nine months ended July 31, 2004 were $8.8 million, compared
with $5.2 million for the same period last year. Net income was $660,000, or
$0.13 and $0.11 per share, basic and diluted, respectively, for the nine months
ended July 31, 2004 compared to a net income of $284,000, or $0.04 per share,
basic and diluted, for the first nine months of fiscal 2003.
Gross margin for the third quarter of 2004 was 53%, compared to 66% for the same
quarter in 2003. Gross margin for the nine months ended July 31, 2004 was 54%,
compared to 62% reported for the same period of 2003. The decrease in the gross
margin is due primarily to the reduction in the gross margin attributable to the
sale of products to a large customer combined with approximately $102,000 of
non-cash quarterly amortization of the intellectual property acquired from
Antares in the fourth quarter of fiscal 2003. Our gross margin on sales to a
large customer for the quarter was lower in the same quarter in 2003 due, in
part, to sales in 2003 of previously written down inventory. The Company has
also seen some erosion in gross margin due to slightly higher raw material and
manufacturing costs. To help counteract component delivery lead-time and price
increase issues, we have decided to purchase certain critical components ahead
of our customer's orders. Although we continue to have limited visibility into
our customer's product demand, our critical inventory purchase plan is based on
our best estimate of current customer demand and their past ordering patterns.
Total operating expenses increased in the third quarter of 2004 to $1.5 million
compared to $1.0 million in the same quarter of 2003, primarily as a result of
increases in the staffing levels of our engineering group combined with an
increase in marketing investments. SBE continues to pursue a policy of
aggressive investment in new product research and development and have added
engineering resources to execute the programs. During the past year SBE returned
to product advertising and industry trade show participation to promote our new
product rollout and take advantage of the economic recovery. Total operating
expenses for the nine months ended July 31, 2004 were $4.1 million compared to
$3.0 million in the same period one year ago.
"Our third quarter revenues grew 81% year over year and we achieved our goals
for sales backlog for the quarter just ended. Although we have not seen a robust
recovery of the overall networking and communications markets, we do continue to
see strength from our legacy products along with customer product deployment
activity in select areas such as WiFi, E911, voice conferencing, and VoIP media
gateways," said William B. Heye, Jr., president and CEO, SBE. "We achieved
important milestones with our new product initiatives during the quarter. I am
pleased to report that we installed our Dual Port Gigabit Ethernet TCP/IP
Offload Engine ("TOE") product in select BETA customer sites and test results
indicate that the TOE performance exceeds expectations. The TOE has been
installed in conjunction with PyX Technologies' iSCSI software for storage
networking applications as well as independently in high-traffic server
applications. This BETA testing will continue as we approach production status
in the coming quarter. We continue to make key investments in R&D and during the
quarter released several new products such as the addition of packet switched
backplane capability to our HighWire line, a new 24 channel T1 card set and a
672 channel T3 adapter card. These new products are attractive to our customers
for their application-ready telecommunications platforms, and enable timely
integration and product deployment. Overall, I am pleased with the progress we
have made in implementing our strategic plan," said Heye.
The company continues to generate adequate cash flow and liquidity to fund its
business plan. SBE closed the quarter with a sales backlog of $3.9 million, $1.5
million in cash and $5.3 million in working capital (current assets less current
liabilities).
BUSINESS OUTLOOK
The following statements are based on current expectations. These statements are
forward-looking, and actual results may differ materially. See the cautionary
statement at the end of this press release for a summary of the risks associated
with forward-looking statements and where to find more information regarding
such risks.
"Based on our current view of business, sales forecasts, and existing backlog,
we expect revenue growth and profitability will continue in the remaining
quarter of fiscal 2004. We anticipate net sales for fiscal 2004 to be between
$12.0 million and $14.0 million and diluted earnings per share for the year will
be between $0.12 and $0.14. We remain committed to our strategy of maintaining
profitability in the near term while positioning the organization for long-term
growth with R&D investments in high growth markets," said Heye.
CONFERENCE CALL INFORMATION
SBE's third quarter conference call will be held Thursday, August 26 at 11:00
a.m. Eastern Time / 8:00 a.m. Pacific Time. To access the call, please dial
800-875-9124 and enter access code number 9209013 or go to www.sbei.com
approximately 10 minutes prior to the start of the call.
A replay of SBE's quarterly conference call will be available for 24 hours. To
access the replay, please dial 800-642-1687 and enter code number 9209013. The
replay can also be accessed for 90 days following the conference call via the
company web site at www.sbei.com.
ABOUT SBE
SBE architects and provides network communications solutions for an extensive
range of applied computing applications. SBE offers a robust portfolio of
standards-based wide area network (WAN), local area network (LAN), and storage
network interface cards (NICs), as well as communications controllers designed
to enable optimal performance and rapid deployment across a full spectrum of
next generation networking systems. Based in San Ramon, California, SBE is a
publicly traded company (NASDAQ: SBEI) with products sold worldwide through
direct sales, OEMs and system integration partners. For additional information,
please visit www.sbei.com.
This news release contains certain forward-looking statements that involve risks
and uncertainties, including statements about management's current estimates
regarding net sales, gross margins and operating costs for the remainder of
fiscal 2004, as well as statements about new product features, market
opportunity for new products, and the demand for services that may be offered by
SBE's customers. Such statements are only predictions and the company's actual
results may differ materially from those anticipated in these forward-looking
statements. Factors that may cause such differences include, but are not limited
to, risks related to the company's reliance on a small number of OEM customers,
rapidly changing product requirements, the introduction of new products, market
acceptance of the company's products, and reliance on strategic partners. These
factors and others are more fully discussed in the documents the company files
from time to time with the Securities and Exchange Commission, particularly, the
company's most recent Form 10-K and Form 10-Q.
SBE and the SBE logo are registered trademarks of SBE, Inc. All other brand or
product names are trademarks or registered trademarks of their respective
holders.
- Tables Follow -
SBE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and nine months ended July 31, 2004 and 2003
(In thousands, except per share amounts) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
----------------- ------------------
2004 2003 2004 2003
------- ------- ------- -------
Net sales $ 2,899 $ 1,621 $ 8,846 $ 5,249
Cost of sales 1,359 559 4,101 1,971
------- ------- ------- -------
Gross profit 1,540 1,062 4,745 3,278
Product research and development 548 334 1,596 913
Sales and marketing 539 361 1,592 1,004
General and administrative 376 381 1,140 1,259
Restructuring costs (benefit) -- (154) -- (154)
Loan reserve (benefit) -- -- (239) --
------- ------- ------- -------
Total operating expenses 1,463 922 4,089 3,022
Operating income 77 140 656 256
Interest and other income 2 2 4 11
------- ------- ------- -------
Income before income taxes 79 142 660 267
Income tax benefit -- (1) -- (17)
------- ------- ------- -------
Net income $ 79 $ 141 $ 660 $ 284
======= ======= ======= =======
Basic income per share $ 0.02 $ 0.03 $ 0.13 $ 0.07
======= ======= ======= =======
Diluted income per share $ 0.01 $ 0.03 $ 0.11 $ 0.07
======= ======= ======= =======
Basic -- shares used in per
share computations 5,078 4,288 5,000 4,145
======= ======= ======= =======
Diluted -- shares used in per
share computations 5,866 4,614 6,009 4,276
======= ======= ======= =======
SBE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
JULY OCTOBER
31, 31,
2004 2003
-------- --------
Current assets:
Cash and cash equivalents $ 1,497 $ 1,378
Trade accounts receivable, net 2,682 1,818
Inventories 2,535 1,880
Other 272 240
Total current assets 6,986 5,316
Property, plant and equipment, net 314 289
Capitalized software costs, net 189 120
Intellectual property, net 816 1,122
Other 28 28
-------- --------
Total assets $ 8,333 $ 6,975
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 1,065 $ 696
Other accrued expenses 635 675
-------- --------
Total current liabilities 1,700 1,371
Other long-term liabilities 1 217
-------- --------
Total liabilities 1,701 1,588
-------- --------
Stockholders' equity:
Common stock 15,745 15,302
Note receivable from stockholder -- (142)
Accumulated deficit (9,113) (9,773)
-------- --------
Total stockholders' equity 6,632 5,387
-------- --------
Total liabilities and stockholders' equity $ 8,333 $ 6,975
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