Networked Computing Infrastructure for the Next Generation Data Center
Multiservice Switches Using InfiniBand Enable Grid Computing (188 KB)
InfiniBand for High Performance, Affordable Storage (427 KB)
2007
|November 5, 2007
Voltaire Achieves Profitability with 88% YoY Revenue Growth in Third Quarter
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$15.5 Million Revenues with Positive Cash Flow from Operations
BILLERICA, Mass. and HERZELIYA, Israel – November 5, 2007 – Voltaire Ltd. (NASDAQ: VOLT), a leading provider of grid backbone solutions, today announced financial results for the three-month period ended September 30, 2007.
Third Quarter Highlights (compared to third quarter 2006):
- Revenues grew by 88% to $15.5 million
- Gross margin increased to 43.6%, up from 34.4%
- Achieved non-GAAP net income of $0.8 million
- GAAP net income of $0.1 million, before non-cash accretion of redeemable preferred shares
- Generated $0.2 million cash flow from operations
- Strong ramp up in revenues for recently released Grid Director™ 20 Gigabits per second switch
Revenue for the third quarter of 2007 totaled $15.5 million, an increase of 88% compared to $8.3 million in the third quarter 2006.
GAAP gross profit for the third quarter of 2007 totaled $6.8 million, or 43.6% of revenues, a 138% increase compared to $2.8 million gross profit in the third quarter 2006, or 34.4% of revenues. GAAP operating profit for the third quarter of 2007 totaled $0.2 million, compared to an operating loss of $2.1 million loss in the third quarter of 2006. Net income, before non-cash accretion of redeemable preferred shares, for the third quarter of 2007 was $0.1 million, or $0.01 per diluted share, compared to a net loss of $2.3 million, or $0.18 per diluted share, in the third quarter of 2006.
Non-GAAP operating profit for the third quarter of 2007 totaled $0.5 million, compared to a non-GAAP operating loss of $2.0 million in the third quarter of 2006.
Non-GAAP net income for the third quarter of 2007 totaled $0.8 million, or $0.04 per diluted share, compared to a non-GAAP net loss of $2.2 million, or $0.17 per diluted share, in the third quarter 2006.
“Strong demand for our products, particularly our switching solutions, as well as the ongoing success of our premier OEM go-to-market strategy drove robust revenue growth and order traction this quarter,” commented Ronnie Kenneth, Chairman and CEO of Voltaire. “This quarter was also especially significant as, for the first time, we generated net income on strong gross margins and positive cash flow from operations.”
“Our vertical solutions approach, go-to-market strategy through our premier server OEM partners, and leading differentiated products, continue to serve as the core fundamental growth drivers of our business,” added Mr. Kenneth. “During the quarter we generated strong demand from our main vertical markets, primarily the traditional government and higher education, fast-growing financial services and manufacturing market verticals. This contributed to a strong ramp up in orders for our switching products, and specifically our recently launched 20 Gigabits per second switch platform, and also contributed to a steady increase in backlog and visibility into the fourth quarter. Looking ahead, we continue to execute on our three core growth drivers to further generate growth and performance.”
Outlook
Revenues for the fourth quarter of 2007 are expected to be in the range of $15.7 - $16.7 million, representing annual revenues in the range of $51.5 - $52.5 million for the full year 2007, an annualized increase of 69-73% over 2006. Earnings per share, on a non-GAAP basis, for the fourth quarter of 2007 are expected to be in the range of $0.01 - $0.03. Voltaire reiterates its long term financial model of gross margins at the level of at least 55 percent, and operating margins in the range of 15 to 18 percent.
Conference Call Details
The Company will be hosting a conference call later today, at 10:00 am EST. 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: | 1–888–407–2553 | UK Dial–in Number: | 0–800–917–9141 |
| Israel Dial–in Number: | 03–918–0650 | International Dial–in Number: | +972–3–918–0650 |
at: 10:00 am Eastern Time; 07:00 am Pacific Time; 03:00 pm UK Time; 05:00 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 non-cash equity-based compensation charges recorded in accordance with SFAS 123R, the non-cash expense recorded in relation to the accretion of redeemable convertible preferred shares, expenses related to changes in fair value of outstanding warrants and amortization of deferred charges on these warrants.. 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. The second and third quarters charge represents the change in value of those preferred shares based upon the initial public offering (IPO) valuation. This is the final adjustment of this type because the put option was eliminated when those shares converted into ordinary shares at the IPO date. 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 Herzeliya, 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, including projections as to future revenues, 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. 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 final prospectus for its IPO filed with the Securities and Exchange Commission on July 27, 2007. 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,
----------------- ---------------
2007 2006
----------------- ---------------
(unaudited)
-----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 53,910 $ 10,237
Restricted deposit 273 267
Accounts receivable:
Trade 6,826 9,637
Other 785 835
Deferred cost 595 2,552
Inventories 8,335 3,937
----------------- ---------------
Total current assets 70,724 27,465
----------------- ---------------
NON CURRENT ASSETS:
Restricted long-term deposits 241 233
Long-term deposits 145 133
Funds in respect of employee
rights upon retirement 1,084 849
----------------- ---------------
1,470 1,215
----------------- ---------------
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
amortization 2,610 1,377
DEFERRED CHARGES, net of accumulated
amortization 346
----------------- ---------------
Total assets $ 74,804 $ 30,403
================= ===============
LIABILITIES, REDEEMABLE CONVERTIBLE
PREFERRED SHARES AND SHAREHOLDERS'
EQUITY (CAPITAL DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable and accruals:
Trade $ 3,112 $ 5,617
Other 4,804 3,665
Deferred revenues 2,777 6,855
----------------- ---------------
Total current liabilities 10,693 16,137
----------------- ---------------
LONG-TERM LIABILITIES:
Long-term loan 5,000
Warrant on redeemable convertible
preferred shares 695
Accrued severance pay 1,813 1,411
Deferred revenues 2,035 1,348
----------------- ---------------
Total long-term liabilities 3,848 8,454
----------------- ---------------
Total liabilities 14,541 24,591
----------------- ---------------
REDEEMABLE CONVERTIBLE PREFERRED
SHARES of NIS 0.01 par value; 63,590
----------------- ---------------
SHAREHOLDERS' EQUITY (CAPITAL
DEFICIENCY)
Ordinary shares of NIS 0.01 par
value 2,785 2,365
Junior Liquidation Securities of
NIS 0.01 par value 1,800
Additional Paid-in capital 146,917
Accumulated deficit (89,439) (61,943)
----------------- ---------------
Total shareholders' equity
(capital deficiency) 60,263 (57,778)
----------------- ---------------
Total liabilities,
redeemable convertible
preferred shares and
shareholders' equity
(capital deficiency) $ 74,804 $ 30,403
================= ===============
VOLTAIRE LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (U.S. dollars in thousands, except per share data) Three months ended Nine months ended September 30, September 30, ----------------------- ----------------------- 2007 2006 2007 2006 ----------- ----------- ----------- ----------- (unaudited) (unaudited) ----------------------- ----------------------- REVENUES $ 15,500 $ 8,263 $ 35,746 $ 16,615 COST OF REVENUES 8,743 5,422 21,183 10,747 ----------- ----------- ----------- ----------- GROSS PROFIT 6,757 2,841 14,563 5,868 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Research and development, net 2,484 1,697 7,724 5,765 Sales and marketing 2,696 2,359 7,210 5,804 General and administrative 1,386 918 3,367 2,453 ----------- ----------- ----------- ----------- Total operating expenses 6,566 4,974 18,301 14,022 ----------- ----------- ----------- ----------- PROFIT (LOSS) FROM OPERATION 191 (2,133) (3,738) (8,154) FINANCIAL INCOME (EXPENSES), net 34 (120) (354) (41) ----------- ----------- ----------- ----------- PROFIT (LOSS) BEFORE INCOME TAX EXPENSES 225 (2,253) (4,092) (8,195) INCOME TAX EXPENSES (91) (226) ----------- ----------- ----------- ----------- NET PROFIT (LOSS), before accretion of redeemable convertible preferred shares $ 134 $ (2,253) $ (4,318) $ (8,195) =========== =========== =========== =========== Accretion of redeemable convertible preferred shares (1) (17,355) (893) (23,608) (2,679) Charge for beneficial conversion feature of series D and D2 redeemable convertible preferred shares (1,088) (134) (1,386) (402) ----------- ----------- ----------- ----------- NET LOSS ATTRIBUTABLE TO ORDINARY SHAREHOLDERS $ (18,309) $ (3,280) $ (29,312) $ (11,276) =========== =========== =========== =========== Net loss per share attributable to ordinary shareholders - basic and diluted $ (1.25) $ (5.06) $ (5.45) $ (17.45) =========== =========== =========== =========== Weighted average number of ordinary shares - basic and diluted 14,609,125 647,859 5,374,898 646,240 =========== =========== =========== =========== Net Profit (loss), before accretion of redeemable convertible preferred shares, per share, on as converted basis: Basic $ 0.01 $ (0.18) $ (0.28) $ (0.64) =========== =========== =========== =========== Diluted $ 0.01 $ (0.18) $ (0.28) $ (0.64) =========== =========== =========== =========== Weighted average number of ordinary shares on as converted basis: Basic 18,550,562 12,791,826 15,690,516 12,790,210 =========== =========== =========== =========== Diluted 20,714,170 12,791,826 15,690,516 12,790,210 =========== =========== =========== =========== (1) 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. The second and
third quarters charge represents the change in value of those
preferred shares based upon the initial public offering (IPO)
valuation. This is the final adjustment of this type because the put
option was eliminated when those shares converted into ordinary
shares at the IPO date. The entire balance in temporary equity has
now been rolled into additional paid in capital on the balance sheet.
VOLTAIRE LTD.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
----------------------- -----------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
(unaudited) (unaudited)
----------------------- -----------------------
REVENUES $ 15,500 $ 8,263 $ 35,746 $ 16,615
COST OF REVENUES 8,743 5,422 21,183 10,747
----------- ----------- ----------- -----------
GROSS PROFIT 6,757 2,841 14,563 5,868
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Research and
development, net 2,434 1,679 7,613 5,720
Sales and marketing 2,627 2,332 7,059 5,736
General and
administrative 1,164 874 2,869 2,333
----------- ----------- ----------- -----------
Total operating
expenses 6,225 4,885 17,541 13,789
----------- ----------- ----------- -----------
PROFIT (LOSS) FROM
OPERATION 532 (2,044) (2,978) (7,921)
FINANCIAL INCOME
(EXPENSES), net 320 (120) 316 (41)
----------- ----------- ----------- -----------
PROFIT (LOSS) BEFORE
INCOME TAX EXPENSES 852 (2,164) (2,662) (7,962)
INCOME TAX EXPENSES (91) (226)
----------- ----------- ----------- -----------
NET PROFIT (LOSS)
ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS $ 761 $ (2,164) $ (2,888) $ (7,962)
=========== =========== =========== ===========
Net Profit (loss) per
share, on as converted
basis:
Basic $ 0.04 $ (0.17) $ (0.18) $ (0.62)
=========== =========== =========== ===========
Diluted $ 0.04 $ (0.17) $ (0.18) $ (0.62)
=========== =========== =========== ===========
Weighted average number
of ordinary shares on
as converted basis:
Basic 18,550,562 12,791,826 15,690,516 12,790,210
=========== =========== =========== ===========
Diluted 20,714,170 12,791,826 15,690,516 12,790,210
=========== =========== =========== ===========
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, 2007
-------------------------------
GAAP Adj. NON-GAAP
----------- ------- -----------
(unaudited)
-------------------------------
REVENUES $ 15,500 $ 15,500
COST OF REVENUES 8,743 8,743
----------- ------- -----------
GROSS PROFIT 6,757 6,757
----------- ------- -----------
OPERATING EXPENSES:
Research and development, net (1) 2,484 (50) 2,434
Sales and marketing (1) 2,696 (69) 2,627
General and administrative (1) 1,386 (222) 1,164
----------- ------- -----------
Total operating expenses 6,566 (341) 6,225
----------- ------- -----------
PROFIT (LOSS) FROM OPERATIONS 191 341 532
FINANCIAL INCOME (EXPENSES), net (2) 34 286 320
----------- ------- -----------
PROFIT (LOSS) BEFORE INCOME TAX
EXPENSES 225 627 852
INCOME TAX EXPENSES (91) (91)
----------- ------- -----------
NET PROFIT (LOSS) before accretion of
redeemable convertible preferred
shares $ 134 $ 627 $ 761
=========== ======= ===========
Accretion of redeemable convertible
preferred shares (17,355) 17,355
Charge for beneficial conversion
feature of series D and D2 redeemable
convertible preferred shares (1,088) 1,088
----------- ------- -----------
NET PROFIT (LOSS) ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS $ (18,309) $19,070 $ 761
=========== ======= ===========
Net Profit (loss) per share
attributable to ordinary
shareholders:
Basic $ (1.25) $ 0.05
=========== ===========
Diluted $ (1.25) $ 0.05
=========== ===========
Weighted average number of ordinary
shares:
Basic 14,609,125 14,609,125
=========== ===========
Diluted 14,609,125 16,772,733
=========== ===========
Net Profit (loss), before accretion of
redeemable convertible preferred
shares, per share, on as converted
basis:
Basic $ 0.01 $ 0.04
=========== ===========
Diluted $ 0.01 $ 0.04
=========== ===========
Weighted average number of ordinary
shares on as converted basis :
Basic 18,550,562 18,550,562
=========== ===========
Diluted 20,714,170 20,714,170
=========== ===========
Nine months ended
September 30, 2007
-------------------------------
GAAP Adj. NON-GAAP
----------- ------- -----------
(unaudited)
-------------------------------
REVENUES $ 35,746 $ 35,746
COST OF REVENUES 21,183 21,183
----------- ------- -----------
GROSS PROFIT 14,563 14,563
----------- ------- -----------
OPERATING EXPENSES:
Research and development, net (1) 7,724 (111) 7,613
Sales and marketing (1) 7,210 (151) 7,059
General and administrative (1) 3,367 (498) 2,869
----------- ------- -----------
Total operating expenses 18,301 (760) 17,541
----------- ------- -----------
PROFIT (LOSS) FROM OPERATIONS (3,738) 760 (2,978)
FINANCIAL INCOME (EXPENSES), net (2) (354) 670 316
----------- ------- -----------
PROFIT (LOSS) BEFORE INCOME TAX
EXPENSES (4,092) 1,430 (2,662)
INCOME TAX EXPENSES (226) (226)
----------- ------- -----------
NET PROFIT (LOSS) before accretion of
redeemable convertible preferred
shares $ (4,318) $ 1,430 $ (2,888)
=========== ======= ===========
Accretion of redeemable convertible
preferred shares (23,608) 23,608
Charge for beneficial conversion
feature of series D and D2 redeemable
convertible preferred shares (1,386) 1,386
----------- ------- -----------
NET PROFIT (LOSS) ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS $ (29,312) $26,424 $ (2,888)
=========== ======= ===========
Net Profit (loss) per share
attributable to ordinary
shareholders:
Basic $ (5.45) $ (0.54)
=========== ===========
Diluted $ (5.45) $ (0.54)
=========== ===========
Weighted average number of ordinary
shares:
Basic 5,374,898 5,374,898
=========== ===========
Diluted 5,374,898 5,374,898
=========== ===========
Net Profit (loss), before accretion of
redeemable convertible preferred
shares, per share, on as converted
basis:
Basic $ (0.28) $ (0.18)
=========== ===========
Diluted $ (0.28) $ (0.18)
=========== ===========
Weighted average number of ordinary
shares on as converted basis :
Basic 15,690,516 15,690,516
=========== ===========
Diluted 15,690,516 15,690,516
=========== ===========
(1) Adjustments related to share-based compensation expenses.
(2) Adjustments related to changes in fair value of outstanding warrants and amortization of deferred charges on these warrants.
VOLTAIRE LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
Three months ended Nine months ended
September 30, September 30,
------------------- -----------------
2007 2006 2007 2006
---------- -------- -------- --------
(unaudited) (unaudited)
------------------- -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Profit (loss), before
accretion of redeemable
convertible preferred shares $ 134 $(2,253) $(4,318) $(8,195)
Adjustments required to
reconcile net profit (loss),
before accretion of redeemable
convertible preferred shares,
to net cash used in operating
activities:
Depreciation and
amortization 269 149 669 440
Change in accrued
severance pay 226 69 402 292
Non-cash share-based
compensation expenses 341 90 760 234
Amortization of deferred
charges 288 28 346 42
Revaluation of warrant
liabilities (2) 324
Changes in operating asset
and liability items:
Decrease (increase) in
accounts receivable 3,746 (4,980) 4,804 (5,340)
Increase (decrease) in
accounts payable and
accruals (5,711) 4,393 (5,486) 6,796
Decrease (increase) in
inventories 952 (2,796) (4,398) (3,061)
---------- -------- -------- --------
Net cash provided by (used in)
operating activities 243 (5,300) (6,897) (8,792)
---------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment (693) (207) (1,902) (553)
Amounts funded in respect of
employee rights upon
retirement, net (173) (40) (235) (190)
Increase in long-term deposits (12) (21) (12) (42)
---------- -------- -------- --------
Net cash used in investing
activities (878) (268) (2,149) (785)
---------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from initial public
offering, net of issuance
costs 46,209 46,209
Proceeds from exercise of
warrants 37 11 136 11
Issuance of redeemable
convertible preferred shares,
net of issuance expenses 11,374
Principal payment on loan (5,000) (5,000)
Long term-loan received 2,500 5,000
---------- -------- -------- --------
Net cash provided by financing
activities 41,246 2,511 52,719 5,011
---------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 40,611 (3,057) 43,673 (4,566)
BALANCE OF CASH AND CASH
EQUIVALENTS AT BEGINNING OF
PERIOD 13,299 10,337 10,237 11,846
---------- -------- -------- --------
BALANCE OF CASH AND CASH
EQUIVALENTS AT END OF PERIOD $ 53,910 $ 7,280 $ 53,910 $ 7,280
========== ======== ======== ========
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
redeemable convertible preferred
shares to warrants on ordinary
shares $ 1,019 $ 1,019
========== ======== ======== ========