FREMONT, Calif., February 28, 2013 – Procera Networks, Inc. (NASDAQ: PKT), the global intelligent
policy enforcement company, today reported financial results for its fourth quarter and year ended
December 31, 2012.
Fourth Quarter 2012 Highlights
- Revenue of $16.6 million, up 6% from Q4 2011; record bookings at $22.4 million, up 124% from Q4 2011
- Won four new Tier 1 customers
- New Tier 1 wins included U.S. fixed line service provider, a Middle Eastern mobile service provider, and an Eastern European cable provider
- Added 17 new service provider customers, including 7 mobile operators
- Two follow-on orders from two large Tier 1 APAC mobile operators
- Two new orders for PL20K in Europe representing one new and one existing customer
- Mobile customers contributed 38% of product revenue
- Support revenue of $3.5 million, up 60% from Q4 2011
- Approximately 40% of bookings came from new customers
- 19 direct Tier 1 trials ongoing or planned over the next 60 days
- Gross margin of 65%, up from 56% in Q4 2011
- GAAP net income of $1.2 million, compared to $1.8 million in Q4 2011
- Non-GAAP net income of $2.4 million, compared to $2.3 million in Q4 2011
Full Year 2012 Highlights
- Record revenue of $59.6 million, up 34% from 2011; record bookings of $67.6 million
- Added 13 new Tier 1 customers across all regions, including 7 Tier 1 mobile operators
- Added more than 50 new service provider customers, including more than 20 new mobile operators
- Mobile customers contributed 30% of product revenue, up from 4% in 2011
- Selected by three of the top five US fixed line operators
- Support revenue of $11.9 million, up 71% from 2011
- Approximately 49% of bookings came from new customers
- Gross margin of 67%, up from 59% for 2011
- GAAP net income of $5.3 million, compared to $3.8 million in 2011
- Non-GAAP net income of $9.4 million, compared to $5.5 million in 2011
- Generated $7.2 million of cash from operations, up from $4.6 million in 2011
- Cash and short-term investments of $132 million at year end; no debt
"The market traction for our solutions is growing as we continue to win new business across all
customer segments and geographies, and we believe we have established industry leadership,
particularly within the mobile segment and among Tier 1 service providers," said James Brear,
President and CEO of Procera Networks. "Our record fourth quarter bookings include important wins
with Tier 1 service providers and the magnitude of our total bookings underscores our leadership and
the competitiveness of our products. We continue to build on our product technology leadership with
the proven industry leading performance and scalability of our solutions, including our high
performance PL20K and the recently introduced ContentLogic intelligence solution, which offer unique
value propositions that further distinguish Procera from the competition in our markets."
Fourth Quarter and 2012 Financial Results
Revenue for the fourth quarter of 2012 was $16.6 million, up 6% from revenue of $15.6 million in the
fourth quarter of 2011. Revenue for 2012 was $59.6 million, up 34% from revenue of $44.4 million in
2011.
Net income for the fourth quarter of 2012 was $1.2 million, or $0.06 per diluted share, compared to net
income of $1.8 million, or $0.12 per diluted share, for the fourth quarter of 2011. Net income for 2012
was $5.3 million, or $0.29 per diluted share, up 42% from net income of $3.8 million, or $0.28 per
diluted share, for 2011.
Non-GAAP net income for the fourth quarter of 2012 was $2.4 million, or $0.12 per diluted share,
compared to non-GAAP net income of $2.3 million, or $0.15 per diluted share, for the fourth quarter of
2011. Non-GAAP net income for 2012 was $9.4 million, or $0.51 per diluted share, compared to a
non-GAAP net income of $5.5 million, or $0.41 per diluted share, for 2011. For an explanation of
non-GAAP financial measures used in this release, and reconciliation to comparable GAAP measures,
please refer to the "Use of Non-GAAP Financial Information" below.
Financial Guidance
Procera is providing guidance of annual revenue growth in the range of 25% to 30% for 2013. We
expect to gain market share in 2013 and anticipate that most of our revenue growth will occur in the
second half of 2013. Our 2013 operating expenses are expected to increase over 2012, beginning in
the first quarter of 2013. Because higher operating expenses will precede our anticipated second half
revenue growth, we may incur operating losses in the first half of 2013 and expect operating profits in
the second half of 2013, on a non-GAAP basis.
The guidance set forth above is an estimate only and actual performance could differ. The Company’s
financial results historically have been volatile, and a number of uncertainties and other factors may
cause the Company’s prior results, performance or achievements to be materially different from future
results.
Conference Call Information
Procera Networks, Inc. will host a conference call at 8:30 a.m. Eastern Time today, February 28, 2013, to
discuss its financial results for its fourth quarter and year ended December 31, 2012. Interested parties
can access the live call by dialing 1-877-941-1427 or 1-480-629-9664 (International) and request the
"Procera" call. A replay of the call will be available approximately one hour following the end of the call
through 11:59 p.m. ET on Thursday, March 7, 2013, by dialing 800-406-7325 and entering the replay
code of 4588176 #. To access the replay from international locations, dial 303-590-3030 using the same
passcode. An archive of the conference call will be available on the Quarterly Results and Events
section of the Procera Networks’ Investor Relations Web site at www.proceranetworks.com/investors.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements related to Procera Networks, Inc., including
statements about Procera's expectations for revenue growth, operating expenses and operating results
for 2013, including the expected timing of revenue growth and expenses, the impact of the company’s
acquisition of Vineyard Networks Inc., the market opportunity and an increase in the Company’s market
share, its industry and technology leadership, its ability to grow in new geographic markets, its new
product offerings and its ability to successfully perform in trials and close new business from projected
sales opportunities. Statements in this release that are not historical or current facts are forward-looking
statements. All forward-looking statements in this release are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees
of future performance and involve known and unknown risks, uncertainties and other factors that may
cause the company’s actual results, performance or achievements to be materially different from any
future results, performances or achievements expressed or implied by the forward-looking statements.
These risks and uncertainties include, without limitation, risks and uncertainties related to the
acceptance and adoption of Procera’s products; the company’s ability to service and upgrade its
products; lengthy sales cycles and lab and field trial delays by service providers; its dependence on a
limited product line; its dependence on key employees; its ability to compete in our industry with
companies that are significantly larger and have greater resources; its ability to protect its intellectual
property rights in a global market; its ability to manufacture product quickly enough to meet potential
demand; its ability to integrate Vineyard Networks and realize anticipated benefits from the acquisition;
and other risks and uncertainties described more fully in the company’s documents filed with or
furnished to the Securities and Exchange Commission. More information about these and other risks
that may impact Procera Networks’ business are described in the "Risk Factors" section of its Form
10-K filed for the year ended December 31, 2011, its quarterly reports filed on Form 10-Q in 2012, and
other reports filed with the SEC, which are available free of charge on the SEC's website at
http://www.sec.gov or on Procera’s website at http://www.proceranetworks.com. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking statements as a prediction
of actual results. All forward-looking statements in this press release are based on information available
to Procera as of the date hereof, and the company undertakes no obligation to update, amend or clarify
any forward-looking statement for any reason.
Use of Non-GAAP Financial Information
In addition to the financial results presented in accordance with Generally Accepted Accounting
Principles (GAAP), this press release and the accompanying tables and the related earnings
conference call contain certain non-GAAP financial measures. Our management regularly uses these
supplemental non-GAAP financial measures internally to understand and manage our business and
forecast future periods and believes that these non-GAAP financial measures, when taken together
with the corresponding GAAP measures, provide incremental insight into the underlying factors and
trends affecting both the Company’s performance and its cash-generating potential.
Our non-GAAP financial measures include adjustments for stock-based compensation expenses and
business development expenses. We have excluded the effect of stock-based compensation and the
cost of outside professional services for negotiating and performing legal, accounting and tax due
diligence for potential mergers, acquisitions and other significant partnership arrangements from our
non-GAAP gross profit, operating expenses and net income measures. Stock-based compensation,
which represents the estimated fair value of stock options and restricted stock granted to employees, is
excluded since grant activities vary significantly from quarter to quarter in both quantity and fair value.
In addition, although stock-based compensation will recur in future periods, excluding this expense
allows us to better compare core operating results with those of our competitors who also generally
exclude stock-based compensation from their core operating results, and who may have different
granting patterns and types of equity awards and who may use different option valuation assumptions
than we do. Business development expenses are necessary as part of certain growth strategies, such
as through mergers and acquisitions and will occur when such transactions are pursued. We have
excluded these expenses because they can vary materially from period to period and
transaction-to-transaction and expenses associated with these business development activities are not
considered a key measure of the Company's operating performance.
Our non-GAAP financial measures may not reflect the full economic impact of the Company’s activities.
Further, these non-GAAP financial measures may be unique to the Company, as they may be different
from non-GAAP financial measures used by other companies. As such, this presentation of non-GAAP
financial measures may not enhance the comparability of the Company’s results to the results of other
companies. Therefore, these non-GAAP financial measures are limited in their usefulness and
investors are cautioned not to place undue reliance on our non-GAAP financial measures. In addition,
investors are cautioned that these non-GAAP financial measures are not intended to be considered in
isolation and should be read in conjunction with our consolidated financial statements prepared in
accordance with GAAP.
For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP
financial measures, please see the section of the accompanying tables titled, "GAAP to Non-GAAP
Reconciliations."
About Procera Networks, Inc.
Procera Networks Inc. (NASDAQ: PKT) delivers Intelligent Policy Enforcement solutions designed for
carriers, service providers and enterprises worldwide. Procera’s PacketLogic solutions provide
actionable intelligence and policy enforcement to ensure a high quality experience for any Internet
connected devices. Network operators deploy Procera’s technology to enable real-time visibility,
superior performance and scalability, and deliver personalized services for millions of enterprises and
consumers. For more information, visit www.proceranetworks.com or follow Procera on twitter at
@ProceraNetworks.
Press Contact
Fran Lowe, Engage PR for Procera Networks, 510-748-8200 x225,
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Investor Relations Contact
Charles Messman or Todd Kehrli, MKR Group Inc., 323-468-2300,
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