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SonicWALL Reports Fourth Quarter and Fiscal Year 2008 Financial Results

Posted on: Wednesday, 11 February 2009, 15:10 CST

SUNNYVALE, Calif., Feb. 11 /PRNewswire-FirstCall/ -- SonicWALL, Inc. (Nasdaq: SNWL), today reported performance in the quarter ended December 31, 2008, with revenue of $54.3 million. The Company shipped 42,000 revenue units in the quarter. Cash flow from operations was $5.4 million.

Net income for the fourth quarter of 2008 calculated in accordance with U.S. generally-accepted accounting principles (GAAP) was $3.5 million, or $0.06 per diluted share. In comparison, GAAP net income for the fourth quarter of 2007 was $23.0 million, or $0.35 per diluted share, reflecting a one-time, positive tax benefit of $24 million.

Non-GAAP net income for the fourth quarter of 2008 was $5.9 million or $0.11 per diluted share. In comparison, non-GAAP net income for the fourth quarter of 2007 was $3.9 million, or $0.06 per diluted share. Non-GAAP net income excludes amortization of purchased intangible assets, restructuring charges, in process research and development, and share-based compensation expense primarily associated with the expensing of stock options in accordance with Financial Accounting Standards No. 123R (FAS 123R). An explanation of our use of non-GAAP measures is included in the section in this press release entitled "Use of Non-GAAP Financial Measures."

For fiscal year 2008 SonicWALL reported revenue of $218.6 million, representing revenue growth of 9.8% over fiscal year 2007. GAAP net income for fiscal year 2008 was $4.9 million, or $0.08 per diluted share, compared to a GAAP net income of $28.6 million, or $0.43 per diluted share, in fiscal 2007.

Non-GAAP net income for fiscal year 2008 was $16.9 million, or $0.29 per diluted share, compared to $18.8 million, or $0.28 per diluted share in fiscal year 2007. Non-GAAP net income excludes amortization of purchased intangible assets, restructuring charges, in process research and development, and share-based compensation expense primarily associated with the expensing of stock options in accordance with Financial Accounting Standards No. 123R (FAS 123R). An explanation of our use of non-GAAP measures is included in the section in this press release entitled "Use of Non-GAAP Financial Measures."

"I am proud of what we accomplished in 2008," said Matt Medeiros, CEO of SonicWALL. "In a challenging environment, we gained market share, improved operating margin, and generated strong operating cash flow, all while investing heavily in technology advancement and infrastructure development that will support the future growth of SonicWALL."

Guidance for Q1 2009

SonicWALL expects first quarter 2009 revenue to be in the range of $48 million to $52 million. The Company expects non-GAAP gross margin to be in the range of 71% to 72% of revenue. SonicWALL expects earnings per share in the first quarter of 2009 to be in the range of $0.04 to $0.06 per diluted share on a non-GAAP basis. On a GAAP basis, inclusive of a total of approximately $4.0 million, before taxes, in combined amortization of purchased intangibles assets, and share-based compensation expense, the Company expects earnings per share to be in the range of $0.00. to $0.02. Share-based compensation expense associated with the expensing of stock options is estimated to be approximately $2.8 million for the first quarter of 2009.

This is the only statement SonicWALL will be giving during the quarter with respect to guidance, unless a decision is made to provide an update.

Conference Call

A conference call to discuss fourth quarter and fiscal year 2008 results will take place today, February 11, 2009, at 2:00 p.m. PT (5:00 p.m. ET). SonicWALL President and CEO Matt Medeiros and SonicWALL CFO Rob Selvi will host the call. A web cast of the live call can be found at http://www.sonicwall.com/us/company/2518.html. A replay of the call will be available beginning at approximately 5:00 p.m. PT (8:00 p.m. ET) today at the Company's website or by telephone until 5:00 p.m. PT on February 16 at 888-203-1112 (toll-free) or 719-457-0820 (International), passcode 2614744.

About SonicWALL, Inc.

Founded in 1991, SonicWALL, Inc. designs, develops and manufactures comprehensive network security, email security, secure remote access, and continuous data protection solutions. For more information, contact SonicWALL at +1 (408) 745-9600 or visit the company web site at http://www.sonicwall.com/.

Use of Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with GAAP, SonicWALL uses non-GAAP measures of results of operations. These non-GAAP results are provided to enhance the user's overall understanding of our current financial performance and our prospects for the future. We believe the non-GAAP results provide useful information to both management and investors by excluding certain expenses. The non-GAAP measures are included to provide investors and management with an alternative method for assessing SonicWALL's operating results. In addition, since we have historically reported non-GAAP results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Cautionary Note Regarding Forward-looking Statements

Certain statements in this press release are "forward-looking statements." The forward-looking statements include without limitation statements regarding our expected revenue for the first quarter of 2009, gross margin on a non-GAAP basis for the first quarter of 2009, earnings per share on a GAAP and non-GAAP basis for the first quarter of 2009, share based compensation expense for the first quarter of 2009, and our ability to continue to deliver industry leading enterprise security solutions. These forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could affect SonicWALL's actual results include, but are not limited to, increased competition in each of the geographic areas in which we do business; exchange rate fluctuations; global macroeconomic and geopolitical conditions; increased competition across all of the market segments in which SonicWALL participates; new product and service introductions by our competitors; significant turnover of our key employees; and unpredictability in the rate of growth of spending of our customers for products and services that SonicWALL provides. In addition, for a more detailed description of the risks and uncertainties that could cause our actual results to differ materially from those anticipated in the forward-looking statements, please see the "Risk Factors" described in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the year ended December 31, 2007 and our interim reports on Form 10-Q for quarterly periods thereafter. All forward-looking statements included in this release are based upon information available to SonicWALL as of the date of the release, and we assume no obligation to update any such forward-looking statement.

NOTE: SonicWALL is a registered trademark of SonicWALL, Inc. Other product and company names mentioned herein may be trademarks and/or registered trademarks of their respective companies.

SonicWALL, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended Year Ended December 31, December 31, ----------------- ----------------- 2008 2007 2008 2007 ----------------- ----------------- Revenue: Product $21,868 $27,295 $90,857 $98,936 License and service 32,389 28,719 127,787 100,263 -------- -------- -------- -------- Total revenue 54,257 56,014 218,644 199,199 -------- -------- -------- -------- Cost of revenue: Product 11,028 11,840 43,507 40,555 License and service 4,690 4,745 20,102 15,894 Amortization of purchased technology 754 717 3,017 2,232 -------- -------- -------- -------- Total cost of revenue 16,472 17,302 66,626 58,681 -------- -------- -------- -------- Gross profit 37,785 38,712 152,018 140,518 -------- -------- -------- -------- Operating expenses: Research and development 9,807 10,479 44,176 39,410 Sales and marketing 18,393 23,194 82,348 77,741 General and administrative 4,479 5,632 18,613 21,473 Amortization of purchased intangible assets 274 302 1,114 715 Restructuring charges - - 1,683 - In-process research and development - - - 1,930 -------- -------- -------- -------- Total operating expenses 32,953 39,607 147,934 141,269 -------- -------- -------- -------- Income (loss) from operations 4,832 (895) 4,084 (751) -------- -------- -------- -------- Interest income and other expense, net 1,040 2,926 6,368 11,771 -------- -------- -------- -------- Income before income taxes 5,872 2,031 10,452 11,020 Benefit (provision) for income taxes (2,418) 20,974 (5,571) 17,601 -------- -------- -------- -------- Net income $3,454 $23,005 $4,881 $28,621 -------- -------- -------- -------- Net income per share: Basic $0.06 $0.37 $0.09 $0.45 -------- -------- -------- -------- Diluted $0.06 $0.35 $0.08 $0.43 -------- -------- -------- -------- Shares used in computing net income per share: Basic 53,575 62,678 56,069 64,305 Diluted 54,459 66,141 57,897 67,099 SonicWALL, Inc. NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS Excluding Amortization of Purchased Intangible Assets Restructuring Charges, In Process Research and Development, Share-Based Compensation (In thousands, except per share amounts) (Unaudited) Three Months Ended Year Ended December 31, December 31, ----------------- ----------------- 2008 2007 2008 2007 -------- -------- -------- -------- Revenue: Product $21,868 $27,295 $90,857 $98,936 License and service 32,389 28,719 127,787 100,263 -------- -------- -------- -------- Total revenue 54,257 56,014 218,644 199,199 -------- -------- -------- -------- Cost of revenue: Product 10,932 11,747 43,138 40,178 License and service 4,650 4,708 19,939 15,747 -------- -------- -------- -------- Total cost of revenue 15,582 16,455 63,077 55,925 -------- -------- -------- -------- Gross profit 38,675 39,559 155,567 143,274 -------- -------- -------- -------- Operating expenses: Research and development 9,079 9,428 40,886 34,768 Sales and marketing 17,460 22,062 78,546 72,917 General and administrative 3,741 4,786 15,620 17,486 -------- -------- -------- -------- Total operating expenses 30,280 36,276 135,052 125,171 -------- -------- -------- -------- Income from operations 8,395 3,283 20,515 18,103 -------- -------- -------- -------- Interest income and other expense, net 1,040 2,926 6,368 11,771 -------- -------- -------- -------- Income before income taxes 9,435 6,209 26,883 29,874 Provision for income taxes (3,491) (2,297) (9,947) (11,054) -------- -------- -------- -------- Non-GAAP net income $5,944 $3,912 $16,936 $18,820 -------- -------- -------- -------- Non-GAAP net income per share: Basic $0.11 $0.06 $0.30 $0.29 -------- -------- -------- -------- Diluted $0.11 $0.06 $0.29 $0.28 -------- -------- -------- -------- Shares used in computing net income per share: Basic 53,575 62,678 56,069 64,305 Diluted 54,459 66,141 57,897 67,099 SonicWALL, Inc. RECONCILIATION of GAAP to NON-GAAP NET INCOME (In thousands, except per share amounts) Three Months Ended Year Ended December 31, December 31, ----------------- ----------------- 2008 2007 2008 2007 -------- -------- -------- -------- Non-GAAP net income $5,944 $3,912 $16,936 $18,820 -------- -------- -------- -------- Share-based compensation expense (2,535) (3,159) (10,617) (13,976) Amortization of purchased intangible assets (1,028) (1,019) (4,131) (2,948) Restructuring charges - - (1,683) - In-process research and development - - - (1,930) Tax effect of adjustments 1,073 23,271 4,376 28,655 -------- -------- -------- -------- Net effect of pro forma adjustments (2,490) 19,093 (12,055) 9,801 -------- -------- -------- -------- Net income $3,454 $23,005 $4,881 $28,621 ======== ======== ======== ======== Diluted Non-GAAP net income per share $0.11 $0.06 $0.29 $0.28 -------- -------- -------- -------- Diluted net income per share $0.06 $0.35 $0.08 $0.43 -------- -------- -------- -------- SonicWALL, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) December 31, December 31, 2008 2007(1) ------------------------------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $45,127 $33,324 Short-term investments 60,327 195,647 Accounts receivable, net 20,945 26,255 Inventories 8,956 6,057 Deferred tax assets 9,423 11,107 Prepaid expenses and other current assets 11,861 9,447 --------- --------- Total current assets 156,639 281,837 Property and equipment, net 9,543 9,357 Goodwill 138,470 138,753 Long-term investments 61,450 - Deferred tax assets, non-current 18,406 16,367 Purchased intangibles and other assets, net 17,328 26,321 --------- --------- Total assets $401,836 $472,635 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $10,717 $10,875 Accrued payroll and related benefits 11,554 20,388 Other accrued liabilities 10,307 7,355 Deferred revenue 88,415 88,818 --------- --------- Total current liabilities 120,993 127,436 Deferred revenue, non current 15,072 12,419 Other accrued liabilities, non-current - 5,076 --------- --------- Total liabilities 136,065 144,931 --------- --------- Shareholders' Equity: Common stock, no par value 396,223 446,431 Accumulated other comprehensive loss, net (9,209) (2,284) Accumulated deficit (121,243) (116,443) --------- --------- Total shareholders' equity 265,771 327,704 --------- --------- Total liabilities and shareholders' equity $401,836 $472,635 --------- --------- (1) December 31, 2007 balances have been derived from the audited financial statements as of the same date. SonicWALL, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended Year ended December 31, December 31, ------------------ ------------------ 2008 2007 2008 2007 ------------------ ------------------ Cash flows from operating activities: Net cash provided by operating activities $5,362 $17,181 $19,233 $62,160 -------- -------- -------- -------- Cash flows from investing activities: Purchase of intangibles, property and equipment (1,208) (4,281) (5,035) (9,281) Cash paid for acquisitions, net of cash acquired - - - (25,269) Change in restricted cash in escrow (1) (1,428) 1,375 (1,379) Maturity and sale of short-term investments, net of purchases 682 1,446 66,736 12,517 -------- -------- -------- -------- Net cash provided by (used in) investing activities (527) (4,263) 63,076 (23,412) -------- -------- -------- -------- Cash flows from financing activities: Issuance of common stock under employee stock option and purchase plans - 9,851 5,306 17,035 Repurchase of common stock - (20,489) (79,408) (49,916) Excess tax benefits from share- based compensation 1,609 - 3,596 1,530 -------- -------- -------- -------- Net cash provided by (used in) financing activities 1,609 (10,638) (70,506) (31,351) -------- -------- -------- -------- Net increase in cash and cash equivalents 6,444 2,280 11,803 7,397 Cash and cash equivalents at beginning of period 38,683 31,044 33,324 25,927 -------- -------- -------- -------- Cash and cash equivalents at end of period $45,127 $33,324 $45,127 $33,324 ======== ======== ======== ========

SOURCE SonicWALL, Inc.

Source: PR Newswire

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