Networked Computing Infrastructure for the Next Generation Data Center
Multiservice Switches Using InfiniBand Enable Grid Computing (188 KB)
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2008
|February 11, 2008
Voltaire Expands Profit Margins and Net Income on Higher Revenues in Fourth Quarter 2007
Annual revenues up 75%, surpassing $53 million; Positive annual operating cash flow
BILLERICA, Mass. and HERZELIYA, Israel – February 11, 2008 – Voltaire Ltd. (NASDAQ: VOLT), a leading provider of grid backbone solutions, today announced financial results for the three and twelve month periods ended December 31, 2007.
Fourth Quarter Highlights (compared to fourth quarter 2006)
- Achieved non-GAAP net income of $1.4 million; GAAP net income of $1.2 million
- Gross margin increased to 48.4%, up from 38.6%
- Revenues grew by 26% to $17.4 million
- Strong operating cash flow as a result of efficient inventory management and customer collection
- Steady increase in orders generated from main commercial vertical markets during fourth quarter
Fourth Quarter
Revenue for the fourth quarter of 2007 totaled $17.4 million, an
increase of 26% compared to $13.8 million in the fourth quarter 2006.
GAAP gross profit for the fourth quarter of 2007 totaled $8.4 million, or 48.4% of revenues, a 57% increase compared to $5.3 million gross profit in the fourth quarter 2006, or 38.6% of revenues. GAAP operating profit for the fourth quarter of 2007 totaled $0.5 million, compared to an operating loss of $0.2 million in the fourth quarter of 2006. Net income for the fourth quarter of 2007 was $1.2 million, or $0.05 per diluted share, compared to a net loss, before non-cash accretion of redeemable preferred shares, of $0.7 million, or $0.05 loss per diluted share, in the fourth quarter of 2006. Net income in the fourth quarter included the recognition of a tax benefit of approximately $0.6 million which we recorded at year end for our U.S. subsidiary, Voltaire, Inc., due to the release of a prior recorded tax valuation allowance resulting from the entity's financial results and future prospects.
Non-GAAP operating profit for the fourth quarter of 2007 totaled $0.7 million, compared to a non-GAAP operating loss of $0.1 million in the fourth quarter of 2006. Non-GAAP net income for the fourth quarter of 2007 totaled $1.4 million, or $0.06 per diluted share, compared to a non-GAAP net loss of $0.2 million, or $0.02 loss per diluted share, in the fourth quarter 2006. Non-GAAP net income in the fourth quarter also included the release of the tax valuation allowance noted above.
Full Year 2007
Revenue for the full year 2007 totaled $53.1 million, an increase of 75% compared to $30.4 million in 2006.
GAAP gross profit for 2007 totaled $23.0 million, or 43.2% of revenues, a 105% increase compared to $11.2 million gross profit in 2006, or 36.8% of revenues. GAAP operating loss for 2007 totaled $3.3 million, compared to an operating loss of $8.3 million in 2006. Net loss for 2007, before non-cash accretion of redeemable preferred shares, was $3.2 million, or $0.19 per diluted share, compared to a net loss of $8.8 million, or $0.69 per diluted share, before non-cash accretion of redeemable preferred shares, in 2006.
Non-GAAP operating loss for full year 2007 totaled $2.2 million, compared to a non-GAAP operating loss of $8.0 million in 2006. Non-GAAP net loss for 2007 totaled $1.5 million, or $0.09 per diluted share, compared to a non-GAAP net loss of $8.2 million, or $0.62 per diluted share, in 2006.
"2007 was a major year for Voltaire in terms of growth and execution, laying strong foundations for future growth and performance in 2008 and beyond. This year we delivered on all of our financial and operational targets, reaching major new milestones. We introduced our Grid Director 20 Gigabits/second switches, became a public company, surpassed the $50 million annual revenue mark and achieved two consecutive quarters of profitability, while steadily increasing our profit margins," commented Ronnie Kenneth, Chairman and CEO of Voltaire.
"Throughout the year we also continued to execute successfully our vertical market strategy and are seeing rapid adoption of Voltaire products in sectors outside of our traditional markets of government, research and education," added Mr. Kenneth. "Looking ahead to 2008, we intend to continue to build on these strong foundations, executing on our three core growth drivers - our vertical solutions approach, go-to-market strategy through our premier server OEM partners, and leading differentiated products, driving continued growth and execution in line with our long term business and financial model."
Outlook
Revenues for the first quarter of 2008 are expected to be in the range of $16 - $17 million, given seasonality, while earnings per share, on a non-GAAP basis, are expected to be around breakeven.
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 Israel Dial-in Number: 03-918-0650 UK Dial-in Number: 0-800-917-9141 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. As the put option was eliminated when the shares converted into ordinary shares at the IPO, the charge in 2007 represents the change in value of those preferred shares accrued through to the IPO date, July 25th 2007, based upon the initial public offering (IPO) valuation. 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(TM). 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)
December 31,
-----------------------
2007 2006
----------- -----------
(unaudited) (audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 52,239 $ 10,237
Available for sale marketable securities 6,142 -
Restricted deposit - 267
Accounts receivable:
Trade 9,772 9,637
Other 1,390 835
Deferred cost 672 2,552
Inventories 5,683 3,937
----------- -----------
Total current assets 75,898 27,465
----------- -----------
NON CURRENT ASSETS:
Restricted long-term deposits 241 233
Long-term deposits 160 133
Available for sale marketable securities 995 -
Deferred income taxes 967 -
Funds in respect of employee rights upon
retirement 1,252 849
----------- -----------
3,615 1,215
----------- -----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 3,010 1,377
DEFERRED CHARGES, net of accumulated
amortization - 346
----------- -----------
Total assets $ 82,523 $ 30,403
=========== ===========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
SHARES AND SHAREHOLDERS' EQUITY (CAPITAL
DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable and accruals:
Trade $ 6,364 $ 5,617
Other 6,134 3,665
Deferred revenues 3,792 6,855
----------- -----------
Total current liabilities 16,290 16,137
----------- -----------
LONG-TERM LIABILITIES:
Long-term loan - 5,000
Warrant on redeemable convertible preferred
shares - 695
Accrued severance pay 2,006 1,411
Deferred revenues 2,524 1,348
----------- -----------
Total long-term liabilities 4,530 8,454
----------- -----------
Total liabilities 20,820 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 2,786 2,365
Junior Liquidation Securities of NIS 0.01
par value - 1,800
Additional Paid-in capital 147,194 -
Accumulated other comprehensive income (4) -
Accumulated deficit (88,273) (61,943)
----------- -----------
Total shareholders' equity (capital
deficiency) 61,703 (57,778)
----------- -----------
Total liabilities, redeemable
convertible preferred shares and
shareholders' equity (capital
deficiency) $ 82,523 $ 30,403
=========== ===========
VOLTAIRE LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except per share data)
Three months ended Year ended
December 31, December 31,
------------------------ -------------------------
2007 2006 2007 2006
----------- ------------ ------------ ------------
(unaudited) (unaudited) (audited)
------------------------ ------------ ------------
REVENUES $ 17,369 $ 13,812 $ 53,115 $ 30,427
COST OF REVENUES 8,970 8,476 30,153 19,223
----------- ------------ ------------ ------------
GROSS PROFIT 8,399 5,336 22,962 11,204
----------- ------------ ------------ ------------
OPERATING EXPENSES:
Research and
development 3,072 1,929 10,796 7,694
Sales and
marketing 3,273 2,477 10,483 8,281
General and
administrative 1,578 1,081 4,945 3,534
----------- ------------ ------------ ------------
Total operating
expenses 7,923 5,487 26,224 19,509
----------- ------------ ------------ ------------
PROFIT (LOSS) FROM
OPERATION 476 (151) (3,262) (8,305)
FINANCIAL INCOME
(EXPENSES), net 180 (419) (174) (460)
----------- ------------ ------------ ------------
INCOME (LOSS)
BEFORE TAX 656 (570) (3,436) (8,765)
TAX BENEFIT (TAX
EXPENSES) 510 (84) 284 (84)
----------- ------------ ------------ ------------
NET INCOME (LOSS),
before accretion
of redeemable
convertible
preferred shares $ 1,166 $ (654) $ (3,152) $ (8,849)
=========== ============ ============ ============
Accretion of
redeemable
convertible
preferred shares
(1) - (894) (23,608) (3,573)
Charge for
beneficial
conversion feature
of series D and D2
redeemable
convertible
preferred shares - (133) (1,386) (535)
----------- ------------ ------------ ------------
NET INCOME (LOSS)
ATTRIBUTABLE TO
ORDINARY
SHAREHOLDERS $ 1,166 $ (1,681) $ (28,146) $ (12,957)
=========== ============ ============ ============
Net income (loss)
per share
attributable to
ordinary
shareholders:
Basic $ 0.06 $ (1.00) $ (3.06) $ (19.92)
=========== ============ ============ ============
Diluted $ 0.05 $ (1.00) $ (3.06) $ (19.92)
=========== ============ ============ ============
Weighted average
number of
ordinary shares:
Basic 20,530,657 650,476 9,194,980 650,476
=========== ============ ============ ============
Diluted 22,828,953 650,476 9,194,980 650,476
=========== ============ ============ ============
(1) The charge for the accretion of redeemable convertible preferred
shares represents a non-cash charge to the income statement because
preferred stockholders 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.
Pro-forma EPS information (without accretion)
--------------------------------------------------
Net income (loss),
before accretion
of redeemable
convertible
preferred shares,
per share, on as
converted basis:
Basic $ 0.06 $ (0.05) $ (0.19) $ (0.69)
=========== ============ ============ ============
Diluted $ 0.05 $ (0.05) $ (0.19) $ (0.69)
=========== ============ ============ ============
Weighted average
number of ordinary
shares on as
converted basis:
Basic 20,530,657 12,794,446 16,897,812 12,794,446
=========== ============ ============ ============
Diluted 22,828,953 12,794,446 16,897,812 12,794,446
=========== ============ ============ ============
VOLTAIRE LTD.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except per share data)
Three months ended Year ended
December 31, December 31,
------------------------ -------------------------
2007 2006 2007 2006
----------- ------------ ------------ ------------
(unaudited) (unaudited) (audited)
------------------------ ------------ ------------
REVENUES $ 17,369 $ 13,812 $ 53,115 $ 30,427
COST OF REVENUES 8,969 8,476 30,152 19,223
----------- ------------ ------------ ------------
GROSS PROFIT 8,400 5,336 22,963 11,204
----------- ------------ ------------ ------------
OPERATING EXPENSES:
Research and
development 2,994 1,915 10,607 7,635
Sales and
marketing 3,185 2,455 10,244 8,191
General and
administrative 1,490 1,040 4,359 3,373
----------- ------------ ------------ ------------
Total operating
expenses 7,669 5,410 25,210 19,199
----------- ------------ ------------ ------------
PROFIT (LOSS) FROM
OPERATION 731 (74) (2,247) (7,995)
FINANCIAL INCOME
(EXPENSES), net 180 (71) 495 (112)
----------- ------------ ------------ ------------
INCOME (LOSS)
BEFORE TAX 911 (145) (1,752) (8,107)
TAX BENEFIT (TAX
EXPENSES) 510 (84) 284 (84)
----------- ------------ ------------ ------------
NET INCOME (LOSS)
ATTRIBUTABLE TO
ORDINARY
SHAREHOLDERS $ 1,421 $ (229) $ (1,468) $ (8,191)
=========== ============ ============ ============
Net income (loss),
before accretion
of redeemable
convertible
preferred shares,
per share, on as
converted basis:
Basic $ 0.07 $ (0.02) $ (0.09) $ (0.62)
=========== ============ ============ ============
Diluted $ 0.06 $ (0.02) $ (0.09) $ (0.62)
=========== ============ ============ ============
Weighted average
number of ordinary
shares on as
converted basis:
Basic 20,530,657 12,794,446 16,897,812 12,794,446
=========== ============ ============ ============
Diluted 22,828,953 12,794,446 16,897,812 12,794,446
=========== ============ ============ ============
VOLTAIRE LTD.
RECONCILIATION BETWEEN GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF
OPERATIONS
(U.S. dollars in thousands, except per share data)
Three months ended
December 31, 2007
----------------------------------
GAAP Adj. NON-GAAP
------------ -------- ------------
(unaudited)
----------------------------------
REVENUES $ 17,369 - $ 17,369
COST OF REVENUES 8,970 (1) 8,969
------------ -------- ------------
GROSS PROFIT 8,399 1 8,400
------------ -------- ------------
OPERATING EXPENSES:
Research and development (1) 3,072 (78) 2,994
Sales and marketing (1) 3,273 (88) 3,185
General and administrative (1) 1,578 (88) 1,490
------------ -------- ------------
Total operating expenses 7,923 (254) 7,669
------------ -------- ------------
PROFIT (LOSS) FROM OPERATION 476 255 731
FINANCIAL INCOME (EXPENSES), net
(2) 180 - 180
------------ -------- ------------
INCOME (LOSS) BEFORE TAX 656 255 911
TAX BENEFIT (TAX EXPENSES) 510 - 510
------------ -------- ------------
NET INCOME (LOSS) before accretion
of redeemable convertible
preferred shares $ 1,166 255 $ 1,421
============ ======== ============
Accretion of redeemable convertible
preferred shares - - -
Charge for beneficial conversion
feature of series D and D2
redeemable convertible preferred
shares - - -
------------ -------- ------------
NET INCOME (LOSS) ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS $ 1,166 $ 255 $ 1,421
============ ======== ============
Net income (loss) per share
attributable to ordinary
shareholders:
Basic $ 0.06 $ 0.07
============ ============
Diluted $ 0.05 $ 0.06
============ ============
Weighted average number of ordinary
shares:
Basic 20,530,657 20,530,657
============ ============
Diluted 22,828,953 22,828,953
============ ============
Net income (loss), before accretion
of redeemable convertible
preferred shares, per share, on as
converted basis:
Basic $ 0.06 $ 0.07
============ ============
Diluted $ 0.05 $ 0.06
============ ============
Weighted average number of ordinary
shares on as converted basis :
Basic 20,530,657 20,530,657
============ ============
Diluted 22,828,953 22,828,953
============ ============
Year ended
December 31, 2007
----------------------------------
GAAP Adj. NON-GAAP
------------ -------- ------------
(unaudited)
----------------------------------
REVENUES $ 53,115 - $ 53,115
COST OF REVENUES 30,153 (1) 30,152
------------ -------- ------------
GROSS PROFIT 22,962 1 22,963
------------ -------- ------------
OPERATING EXPENSES:
Research and development (1) 10,796 (189) 10,607
Sales and marketing (1) 10,483 (239) 10,244
General and administrative (1) 4,945 (586) 4,359
------------ -------- ------------
Total operating expenses 26,224 (1,014) 25,210
------------ -------- ------------
PROFIT (LOSS) FROM OPERATION (3,262) 1,015 (2,247)
FINANCIAL INCOME (EXPENSES), net
(2) (174) 669 495
------------ -------- ------------
INCOME (LOSS) BEFORE TAX (3,436) 1,684 (1,752)
TAX BENEFIT (TAX EXPENSES) 284 - 284
------------ -------- ------------
NET INCOME (LOSS) before accretion
of redeemable convertible
preferred shares $ (3,152) 1,684 $ (1,468)
============ ======== ============
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 INCOME (LOSS) ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS $ (28,146) $26,678 $ (1,468)
============ ======== ============
Net income (loss) per share
attributable to ordinary
shareholders:
Basic $ (3.06) $ (0.16)
============ ============
Diluted $ (3.06) $ (0.16)
============ ============
Weighted average number of ordinary
shares:
Basic 9,194,980 9,194,980
============ ============
Diluted 9,194,980 9,194,980
============ ============
Net income (loss), before accretion
of redeemable convertible
preferred shares, per share, on as
converted basis:
Basic $ (0.19) $ (0.09)
============ ============
Diluted $ (0.19) $ (0.09)
============ ============
Weighted average number of ordinary
shares on as converted basis :
Basic 16,897,812 16,897,812
============ ============
Diluted 16,897,812 16,897,812
============ ============
(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 Year ended
December 31, December 31,
----------------- ---------------------
2007 2006 2007 2006
-------- -------- ----------- ---------
(unaudited) (unaudited) (audited)
----------------- ----------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (loss), before
accretion of redeemable
convertible preferred
shares $ 1,166 $ (654) $ (3,152) $(8,849)
Adjustments required to
reconcile net income (loss)
to net cash provided by
(used in) operating
activities:
Depreciation and
amortization 321 168 990 608
Deferred income taxes (1,032) - (1,032) -
Change in accrued
severance pay 193 126 595 418
Non-cash share-based
compensation expenses 255 76 1,015 310
Amortization of deferred
charges - 28 346 70
Revaluation of warrant
liabilities - 279 324 279
Changes in operating asset
and liability items:
Decrease (increase) in
accounts receivable (3,198) (4,560) 1,606 (9,900)
Increase in accounts
payable and accruals 6,594 5,467 1,108 12,263
Decrease (increase) in
inventories 2,652 2,553 (1,746) (508)
-------- -------- ----------- ---------
Net cash provided by (used
in) operating activities 6,951 3,483 54 (5,309)
-------- -------- ----------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment (721) (471) (2,623) (1,024)
Investment in marketable
securities (7,233) - (7,233) -
Amounts funded in respect of
employee rights upon
retirement, net (168) (80) (403) (270)
Decrease (Increase) in
long-term deposits (15) 18 (27) (24)
-------- -------- ----------- ---------
Net cash used in investing
activities (8,137) (533) (10,286) (1,318)
-------- -------- ----------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from IPO, net of
issuance costs (513) - 45,696 -
Proceeds from exercise of
warrants 28 7 164 18
Issuance of redeemable
convertible preferred
shares, net of issuance
expenses - - 11,374 -
Principal payment on loan - - (5,000) -
Long term-loan received - - - 5,000
-------- -------- ----------- ---------
Net cash provided (used in)
by financing activities (485) 7 52,234 5,018
-------- -------- ----------- ---------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,671) 2,957 42,002 (1,609)
BALANCE OF CASH AND CASH
EQUIVALENTS AT BEGINNING OF
PERIOD 53,910 7,280 10,237 11,846
-------- -------- ----------- ---------
BALANCE OF CASH AND CASH
EQUIVALENTS AT END OF PERIOD $52,239 $10,237 $ 52,239 $10,237
======== ======== =========== =========
Supplemental disclosure of
non-cash activities:
Cumulative adjustment from
adoption of FIN 48 - - $ 221 -
======== ======== =========== =========
Conversion of redeemable
convertible preferred shares
to ordinary shares - - $ 99,958 -
======== ======== =========== =========
Conversion of warrants on
redeemable convertible
preferred shares to warrants
on ordinary shares - - $ 1,019 -
======== ======== =========== =========