[Exhibit 99.1]
Castelle Reports Strong Financial Results for Third Quarter 2003
o Net income rises year-over-year and sequentially, marking ninth
consecutive quarter of profitability
o Nine-month net income more than doubles from 2002
o Balance sheet remains strong with $4.4 million in cash, up
approximately $1.0 million from end of 2002
o Company introduces new FaxPress Premier(TM) network fax servers
during third quarter
MORGAN HILL, CA - October 24, 2003 - Castelle (Nasdaq: CSTL), a leading provider
of fax solutions for Fortune 1000 companies and small to medium-sized
businesses, today announced financial results for the Company's third quarter
ended September 30, 2003.
Sales for the third quarter of 2003 were $2.57 million, up from $2.54 million in
the third quarter of 2002, and up sequentially from $2.51 million in the second
quarter of 2003. Net income for the third quarter of 2003 was $241,000, or $0.06
per diluted share, up 5.7% from $228,000, or $0.05 per diluted share, in the
year-ago quarter. Net income in the third quarter of 2003 was also higher
sequentially from $228,000, or $0.05, per diluted share, in the second quarter
of 2003.
For the nine months ended September 30, 2003, sales were up 5.6% to $7.58
million from $7.17 million for the same period in 2002. Net income rose to
$712,000, or $0.17 per diluted share, up from $322,000, or $0.07 per diluted
share, for the equivalent period.
The Company also reported that its cash position has strengthened significantly
throughout the current year. Cash and cash equivalents as of September 30, 2003
stood at $4.43 million, up from $3.46 million on December 31, 2002.
Scott C. McDonald, President and CEO, stated, "Our third quarter results clearly
indicate that Castelle is continuing to build shareholder value. During the
course of 2003 we reinvested in engineering, which led to the development of our
new FaxPress Premier network fax servers. We are extremely pleased with the
introduction and launch of FaxPress Premier in the third quarter. We expect
sales to increase from this new product line in the fourth quarter and, based on
the market's initial acceptance, are optimistic about its growth prospects as we
head into 2004."
Castelle Introduces New FaxPress Premier Network Fax Servers in Third Quarter
Mr. McDonald noted that Castelle's introduction of FaxPress Premier at
September's PC Expo in New York City was one of the most significant events in
the Company's history. The new FaxPress Premier network fax servers for
enterprise-level users employ patent-pending technology that builds on existing
FaxPress(TM) hardware and software features. It offers an advanced level of
network fax capabilities, including integrated file storage, embedded email
gateways and a secure web interface. FaxPress Premier is available as an analog
or digital rack-mountable network fax server; FaxPress Premier Analog provides
up to 16 analog fax channels, while FaxPress Premier Digital provides up to 72
T1 channels. Among other advances, FaxPress Premier doubles the number of
channels in the analog fax server family and expands into the digital market
with T1 protocol support.
About Castelle
Castelle develops office automation systems that allow organizations to easily
implement faxing and printing over local area networks and the Internet. A
market leader in fax solutions for small to medium sized workgroups, Castelle's
FaxPress fax servers provide a simple way to integrate fax with email, desktop
and back-end applications. The Company also manufactures LANpress print servers,
which enable users to locate printers anywhere on the network. 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 used by Fortune
1000 companies as well as small to medium-sized businesses and are available
through a worldwide network of distributors, resellers, online retailers, and
the Castelle Online Store. Visit Castelle online at www.castelle.com.
If you would like to be added to Castelle's investor email list, please contact
Karin Smith at ksmith@castelle.com.
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FaxPress Premier(TM) and FaxPress(TM) are trademarks, LANPress(R) is a
registered trademark of Castelle.
Forward-Looking Statements
This press release contains forward-looking statements including references to
demand for Castelle products and sales growth. 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, introduction of new products by
our competitors, the timely development, acceptance and pricing of new products,
and general economic conditions as they affect the Company's customers.
Investors are referred to the 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. All forward-looking
statements are qualified by these cautionary statements and are made only as of
the date they are made. The Company assumes no obligation to update the
forward-looking information.
For more information:
Scott C. McDonald Karin Smith
President & Chief Executive Officer Senior Marketing Manager
Tel: 408-852-8000 Tel: 408-852-8034
Fax: 408-852-8100 Fax: 408-852-8134
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CASTELLE
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
Three months ended Nine months ended
9/30/2003 9/30/2002 9/30/2003 9/30/2002
--------- --------- --------- ---------
Net sales $ 2,566 $ 2,543 $ 7,577 $ 7,172
Cost of sales 555 735 1,825 2,181
--------- --------- --------- ---------
Gross profit 2,011 1,808 5,752 4,991
Operating expenses:
Research and development 427 312 1,211 1,074
Sales and marketing 846 799 2,341 2,342
General and administrative 497 475 1,463 1,329
Restructuring charges -- -- -- (40)
--------- --------- --------- ---------
Total operating expenses 1,770 1,586 5,015 4,705
Income from operations 241 222 737 286
Interest and other income/(expense), net 2 6 (19) 36
--------- --------- --------- ---------
Income before income taxes 243 228 718 322
Provision for income taxes 2 -- 6 --
--------- --------- --------- ---------
Net income $ 241 $ 228 $ 712 $ 322
========= ========= ========= =========
Net income per share - basic $ 0.07 $ 0.05 $ 0.22 $ 0.07
========= ========= ========= =========
Net income per share - diluted $ 0.06 $ 0.05 $ 0.17 $ 0.07
========= ========= ========= =========
Shares used in per share calculation - basic 3,286 4,755 3,260 4,750
========= ========= ========= =========
Shares used in per share calculation - diluted 4,344 4,787 4,154 4,778
========= ========= ========= =========
As a percentage of net sales:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 21.6% 28.9% 24.1% 30.4%
--------- --------- --------- ---------
Gross profit 78.4% 71.1% 75.9% 69.6%
Operating expenses:
Research and development 16.6% 12.3% 16.0% 15.0%
Sales and marketing 33.0% 31.4% 30.9% 32.7%
General and administrative 19.4% 18.7% 19.3% 18.5%
Restructuring charges -- -- -- (0.6%)
--------- --------- --------- ---------
Total operating expenses 69.0% 62.4% 66.2% 65.6%
Income from operations 9.4% 8.7% 9.7% 4.0%
Interest and other income/(expense), net 0.1% 0.3% (0.2%) 0.5%
--------- --------- --------- ---------
Income before income taxes 9.5% 9.0% 9.5% 4.5%
Provision for income taxes 0.1% 0.0% 0.1% 0.0%
--------- --------- --------- ---------
Net income 9.4% 9.0% 9.4% 4.5%
========= ========= ========= =========
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CASTELLE
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
September 30, 2003 December 31, 2002
------------------ -----------------
Assets
Current assets:
Cash and cash equivalents $4,431 $3,460
Accounts receivable, net 591 444
Inventories, net 1,117 1,110
Prepaid and other assets 215 88
---------------------------
Total current assets 6,354 5,102
Property & equipment, net 405 425
Other assets 108 108
---------------------------
Total assets $6,867 $5,635
===========================
Liabilities & shareholders' equity
Current liabilities:
Long-term debt, current portion $ 17 $ 21
Accounts payable 357 359
Accrued liabilities 2,684 2,288
---------------------------
Total current liabilities 3,058 2,668
Long-term debt, net of current portion 32 44
---------------------------
Total liabilities 3,090 2,712
Shareholders' equity 3,777 2,923
---------------------------
Total liabilities & shareholders' equity $6,867 $5,635
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