EXHIBIT 99
News Release | [LOGO] Inet. | Inet Technologies, Inc. 1500 North Greenville Avenue Richardson,TX 75081 Phone: 469-330-4000 Fax: 469-330-4001 |
FOR MORE INFORMATION, CONTACT:
Ms. Kelly Love, CFA
Director of Investor Relations
Inet Technologies, Inc.
(469) 330-4171
INET TECHNOLOGIES REPORTS FIRST QUARTER FINANCIAL RESULTS
Company Increases Profitability and Generates $9.8 Million in Operating Cash Flow
Richardson, Texas – April 22, 2003 – Inet Technologies, Inc. (NASDAQ: INTI),a leading global provider of communications software solutions that enable carriers to more strategically operate their businesses, today reported financial results for its first quarter ended March 31, 2003.
Revenues for the three months ended March 31, 2003 were $25.0 million versus revenues of $25.0 million in the fourth quarter of 2002 and $27.5 million in the first quarter of 2002. The Company reported net income of $3.3 million, or $0.08 per diluted share, for the first quarter of 2003, compared to net income of $2.7 million, or $0.06 per diluted share, for both the fourth quarter of 2002 and the first quarter of 2002.
“The Inet team continues to deliver solid results,” said Elie Akilian, president and chief executive officer of Inet. “I am pleased with our profitability levels and our ability to generate $9.8 million in operating cash flow during the first quarter. International markets have traditionally played a major role in our success, and the first quarter was no exception. We have a healthy sales pipeline that includes a growing number of opportunities with wireless providers around the world, especially for our GPRS mobile data and interconnection management solutions. We also saw a slight improvement during the first quarter in our diagnostics business driven in part by initial success with some of our new reseller partners. We hope to see continued improvement in the diagnostics area throughout the year as the introduction of voice-over-packet technologies by both carriers and equipment manufacturers around the world continues to build momentum.”
“We are very pleased with our financial results for the first quarter,” said Jeff Kupp, chief financial officer of Inet. “One of the drivers for our increased profitability levels was the very healthy gross margins generated during the quarter. The increase in gross margins was driven by the higher mix of expansion systems that we installed during the quarter – a large portion of which were software applications. Longer term, we expect our gross margins to average in the mid-60s range, although during the second quarter, we expect gross margins to fall slightly below this level due to the higher mix of hardware-intensive new systems that we expect to install. We also expect operating expenses in the second quarter to return to more normal levels, which should help mitigate some of the effects of lower gross margins.”
Order activity during the first quarter was below the levels experienced in the fourth quarter of 2002. The Company believes that the lower order levels were driven by telecom seasonality typically experienced during the first quarter as well as the lumpiness caused by large customer orders. Despite the fact that the book-to-bill ratio for the first quarter of 2003 was less than 1:1, the combined book-to-bill ratio for the fourth quarter of 2002 and the first quarter of 2003 exceeded 1:1.
During the first quarter of 2003, the Company had one international customer that accounted for approximately 44 percent of total revenues. The Company expects to continue to have one to three ten percent customers in most quarters, but would consider it unusual for any one customer to account for as high a percentage of total revenues as was the case in the first quarter.
New Products
During the first quarter, the Company announced its new Unified Assurance solution strategy. Using Inet’s Unified Assurance solution, communications carriers can simultaneously manage their voice and data services at the customer, service and network layers in an interactive and real-time manner to proactively detect network and service problems and identify and manage the customers most impacted by the service degradation. The Unified Assurance solution enables carriers to achieve high levels of customer assurance across multiple services, service assurance across multiple networks and network assurance across multiple technologies. The key benefits of Inet’s Unified Assurance solution include improved acquisition and retention rates of high-value customers, streamlined operational support systems, reduced operating expenses and capital expenditures resulting from increased organizational efficiencies and informed business planning.
“The introduction and initial rollout of Unified Assurance is proceeding very well,” said Mr. Akilian. “We believe our Unified Assurance solution is what carriers need in today’s competitive market to strategically and proactively manage their businesses based on the experiences of their highest-value customers. The feedback that we have received
thus far supports this belief. During the first quarter, we took our first revenues on our new service assurance product, Orion. We also added a second field trial for Beamer, our customer assurance product, during the first quarter. We have received requests for additional field trials, which we expect to start during the second quarter. We expect it to become generally available during the next few months. I am very pleased with the initial reaction to the offering. Our goal is to build a strong sales pipeline for these solutions to generate future growth opportunities for Inet.”
Stock Repurchase
In January 2003, Inet announced that it repurchased approximately 8.97 million restricted shares of its common stock from Mark Weinzierl, one of the Company’s founders and directors, in a private transaction. The shares repurchased represented approximately 19 percent of the total shares outstanding prior to the transaction and all of the Inet shares owned by Mr. Weinzierl. The total value of the share repurchase was approximately $35.4 million, or $3.95 per share, representing a 38 percent discount to the market price of Inet stock at the time of closing.
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About Inet Technologies, Inc.
Founded in 1989, Inet Technologies is a leading global provider of communications software solutions that enable carriers to more strategically operate their businesses. Inet’s Unified Assurance solution – which includes products that address customer, service and network assurance – converts network signaling, service and other infrastructure-level information into valuable and actionable intelligence that carriers use to ensure the health of their revenue-generating infrastructure. These real-time powered solutions help carriers realize organizational efficiencies in managing their operations as well as improve the acquisition and retention rates for targeted, high-value customers. Inet’s diagnostics solutions allow communications carriers and equipment manufacturers to quickly and cost-effectively design, deploy and maintain current- and next-generation networks and network elements. Inet is headquartered in Richardson, Texas and has approximately 470 employees worldwide. Inet is an ISO 9001 registered company. For more information, visit Inet on the Web atwww.inet.com.
Inet Technologies, Unified Assurance, Orion and Beamer are trademarks of Inet Technologies, Inc. All other trademarks or registered trademarks belong to their respective owners.
This release contains forward-looking statements, including statements regarding the ability of our customers to achieve the anticipated benefits of our products, our business prospects and anticipated financial results and our product and operating strategies. Such forward-looking statements involve risks and uncertainties. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are the effects of a further general economic slowdown, any further slowdown in telecommunications spending, any reversal or slowdown in the pace of privatization, deregulation and restructuring of telecommunications markets worldwide, unforeseen changes in anticipated expenses or revenues, challenges associated with operating internationally, delays in implementation of our products, product defects, product development and introduction delays, increased competition, any reduction in demand for our products and solutions and other factors detailed in Inet’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2002.
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INET TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
March 31, 2003 | December 31, 2002 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 163,139 |
| $ | 189,076 |
| ||
Trade accounts receivable |
| 11,738 |
|
| 10,211 |
| ||
Unbilled receivables |
| 180 |
|
| 155 |
| ||
Inventories |
| 8,425 |
|
| 7,458 |
| ||
Deferred income taxes |
| 850 |
|
| 850 |
| ||
Other current assets |
| 4,747 |
|
| 4,654 |
| ||
Total current assets |
| 189,079 |
|
| 212,404 |
| ||
Property and equipment, net |
| 13,844 |
|
| 15,215 |
| ||
Other assets |
| 602 |
|
| 300 |
| ||
Total assets | $ | 203,525 |
| $ | 227,919 |
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,473 |
| $ | 1,078 |
| ||
Accrued compensation and benefits |
| 2,811 |
|
| 4,113 |
| ||
Deferred revenues |
| 24,011 |
|
| 18,323 |
| ||
Income taxes payable |
| 3,195 |
|
| 1,953 |
| ||
Other accrued liabilities |
| 5,393 |
|
| 4,478 |
| ||
Total current liabilities |
| 36,883 |
|
| 29,945 |
| ||
Deferred income taxes |
| 18 |
|
| 18 |
| ||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock |
| 47 |
|
| 47 |
| ||
Additional paid-in capital |
| 75,095 |
|
| 75,075 |
| ||
Unearned compensation |
| (266 | ) |
| (407 | ) | ||
Retained earnings |
| 126,496 |
|
| 123,241 |
| ||
Treasury stock |
| (34,748 | ) |
| — |
| ||
Total stockholders’ equity |
| 166,624 |
|
| 197,956 |
| ||
Total liabilities and stockholders’ equity | $ | 203,525 |
| $ | 227,919 |
| ||
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INET TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three months ended March 31, | |||||||
2003 | 2002 | ||||||
Revenues: | |||||||
Product and license fees | $ | 17,518 | $ | 21,003 |
| ||
Services |
| 7,524 |
| 6,492 |
| ||
Total revenues |
| 25,042 |
| 27,495 |
| ||
Cost of revenues: | |||||||
Product and license fees |
| 2,902 | �� |
| 6,232 |
| |
Services |
| 4,167 |
| 3,158 |
| ||
Total cost of revenues |
| 7,069 |
| 9,390 |
| ||
Gross profit |
| 17,973 |
| 18,105 |
| ||
Operating expenses: | |||||||
Research and development |
| 7,685 |
| 8,456 |
| ||
Sales and marketing |
| 3,515 |
| 4,107 |
| ||
General and administrative |
| 2,419 |
| 2,020 |
| ||
| 13,619 |
| 14,583 |
| |||
Income from operations |
| 4,354 |
| 3,522 |
| ||
Other income (expense): | |||||||
Interest income |
| 426 |
| 690 |
| ||
Other income (expense) |
| 16 |
| (180 | ) | ||
| 442 |
| 510 |
| |||
Income before provision for income taxes |
| 4,796 |
| 4,032 |
| ||
Provision for income taxes |
| 1,541 |
| 1,292 |
| ||
Net income | $ | 3,255 | $ | 2,740 |
| ||
Earnings per common share: | |||||||
Basic | $ | 0.08 | $ | 0.06 |
| ||
Diluted | $ | 0.08 | $ | 0.06 |
| ||
Weighted-average shares outstanding: | |||||||
Basic |
| 40,395 |
| 46,838 |
| ||
Diluted |
| 40,563 |
| 47,194 |
| ||
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INET TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three months ended March 31, | ||||||||
2003 | 2002 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 3,255 |
| $ | 2,740 |
| ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation |
| 1,803 |
|
| 1,747 |
| ||
Stock compensation |
| 141 |
|
| — |
| ||
Change in assets and liabilities: | ||||||||
Increase in trade accounts receivable |
| (1,527 | ) |
| (385 | ) | ||
(Increase) decrease in unbilled receivables |
| (25 | ) |
| 549 |
| ||
Decrease in income taxes receivable |
| — |
|
| 532 |
| ||
(Increase) decrease in inventories |
| (967 | ) |
| 145 |
| ||
(Increase) decrease in other assets |
| (395 | ) |
| 249 |
| ||
Increase in accounts payable |
| 395 |
|
| 4 |
| ||
Increase in taxes payable |
| 1,329 |
|
| 920 |
| ||
Increase (decrease) in accrued compensation and benefits |
| (1,302 | ) |
| 412 |
| ||
Increase in deferred revenues |
| 5,688 |
|
| 1,866 |
| ||
Increase in other accrued liabilities |
| 1,415 |
|
| 2,336 |
| ||
Net cash provided by operating activities |
| 9,810 |
|
| 11,115 |
| ||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment |
| (932 | ) |
| (551 | ) | ||
Net cash used in investing activities |
| (932 | ) |
| (551 | ) | ||
Cash flows from financing activities: | ||||||||
Repurchase of common stock |
| (35,431 | ) |
| — |
| ||
Proceeds from issuance of common stock upon exercise of stock options and purchases under employee stock purchase plan |
| 616 |
|
| 910 |
| ||
Net cash (used in) provided by financing activities |
| (34,815 | ) |
| 910 |
| ||
Net (decrease) increase in cash and cash equivalents |
| (25,937 | ) |
| 11,474 |
| ||
Cash and cash equivalents at beginning of period |
| 189,076 |
|
| 154,889 |
| ||
Cash and cash equivalents at end of period | $ | 163,139 |
| $ | 166,363 |
| ||
Supplemental disclosure: | ||||||||
Income taxes paid | $ | 155 |
| $ | — |
| ||
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INET TECHNOLOGIES, INC.
ADDITIONAL FINANCIAL INFORMATION
(Unaudited)
The following table presents additional financial information about Inet Technologies, Inc. for the three months ended March 31, 2003; December 31, 2002; September 30, 2002; June 30, 2002 and March 31, 2002 , respectively.
3/31/03 | 12/31/02 | 9/30/02 | 6/30/02 | 3/31/02 | ||||||||||||||||
Cash (in 000s) | $ | 163,139 |
| $ | 189,076 |
| $ | 171,711 |
| $ | 171,022 |
| $ | 166,363 |
| |||||
Days sales outstanding (with unbilled) |
| 43 |
|
| 38 |
|
| 57 |
|
| 56 |
|
| 55 |
| |||||
Inventory (in 000s): | ||||||||||||||||||||
Raw materials | $ | 3,268 |
| $ | 3,774 |
| $ | 4,489 |
| $ | 5,491 |
| $ | 6,772 |
| |||||
WIP |
| 154 |
|
| 445 |
|
| 1,212 |
|
| 705 |
|
| 162 |
| |||||
Finished goods |
| 5,003 |
|
| 3,239 |
|
| 1,915 |
|
| 2,499 |
|
| 5,375 |
| |||||
$ | 8,425 |
| $ | 7,458 |
| $ | 7,616 |
| $ | 8,695 |
| $ | 12,309 |
| ||||||
Inventory turns |
| 3.4 |
|
| 4.6 |
|
| 5.2 |
|
| 5.2 |
|
| 3.1 |
| |||||
Total employees: |
| 472 |
|
| 470 |
|
| 480 |
|
| 518 |
|
| 524 |
| |||||
R&D |
| 246 |
|
| 247 |
|
| 249 |
|
| 268 |
|
| 271 |
| |||||
Support/Integration |
| 121 |
|
| 121 |
|
| 126 |
|
| 125 |
|
| 125 |
| |||||
Sales and marketing |
| 61 |
|
| 62 |
|
| 64 |
|
| 79 |
|
| 81 |
| |||||
General and administrative |
| 44 |
|
| 40 |
|
| 41 |
|
| 46 |
|
| 47 |
| |||||
Margins and operating expenses as a % of total revenues: | ||||||||||||||||||||
Gross margin – total |
| 71.8 | % |
| 65.3 | % |
| 56.9 | % |
| 57.0 | % |
| 65.8 | % | |||||
Gross margin – product & license fees |
| 83.4 |
|
| 68.9 |
|
| 57.9 |
|
| 58.6 |
|
| 70.3 |
| |||||
Gross margin – services |
| 44.6 |
|
| 56.4 |
|
| 54.3 |
|
| 52.7 |
|
| 51.4 |
| |||||
Research and development |
| 30.7 |
|
| 28.2 |
|
| 30.3 |
|
| 27.8 |
|
| 30.8 |
| |||||
Sales and marketing |
| 14.0 |
|
| 16.0 |
|
| 15.7 |
|
| 18.1 |
|
| 14.9 |
| |||||
General and administrative |
| 9.7 |
|
| 8.1 |
|
| 7.9 |
|
| 8.1 |
|
| 7.3 |
| |||||
Operating income margin |
| 17.4 |
|
| 13.1 |
|
| 2.0 |
|
| 3.0 |
|
| 12.8 |
| |||||
Net income margin |
| 13.0 |
|
| 10.9 |
|
| 3.5 |
|
| 5.1 |
|
| 10.0 |
| |||||
Operating cash flow (in 000s) | $ | 9,810 |
| $ | 18,099 |
| $ | 288 |
| $ | 5,371 |
| $ | 11,115 |
| |||||
Capital expenditures (in 000s) | $ | 932 |
| $ | 735 |
| $ | 241 |
| $ | 763 |
| $ | 551 |
| |||||
Common stock outstanding (in 000s) |
| 38,362 |
|
| 47,158 |
|
| 47,073 |
|
| 46,894 |
|
| 46,882 |
| |||||
Revenues from international markets: |
| 81 | % |
| 71 | % |
| 66 | % |
| 74 | % |
| 77 | % | |||||
EMEA |
| 71 | % |
| 63 | % |
| 59 | % |
| 56 | % |
| 65 | % | |||||
Asia/Pacific |
| 8 | % |
| 5 | % |
| 5 | % |
| 11 | % |
| 10 | % | |||||
Other |
| 2 | % |
| 3 | % |
| 2 | % |
| 7 | % |
| 2 | % | |||||
Top 10 customers as % of total revenues |
| 69 | % |
| 71 | % |
| 67 | % |
| 60 | % |
| 78 | % |
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