Procera Networks - Policy Enforcement in Motion

LOS GATOS, Calif., August 12, 2009 – Procera® Networks Inc. (NYSE Amex: PKT), a developer of Evolved Deep Packet Inspection (DPI) solutions providing traffic awareness, control and protection for complex networks, announced its earnings for its second quarter ended June 30, 2009 (Q2’09).

Q2’09 Key Highlights:

• Focus on Tier 1 service providers achieves record bookings of $7.1 million
• Announced initial $5.4M purchase order from a major Tier 1 Service Provider
• Fifth consecutive quarter of year-over-year revenue growth
• Revenue of $3.2 million; increased 24% year-over-year and 10% sequentially
• Gross margin impacted by charges; underlying gross margin rate remained strong 
• Reduced operating expenses 30% year-over-year

“Our achievements in the second quarter were significant. We expect the magnitude of our Tier 1 win will be felt across all regions and verticals,” said James Brear, president and CEO of Procera. “This win, along with our continued success in the Higher Education market, validates our technology leadership.”

Total revenue for Q2’09 was $3.2 million, an increase of 24% from $2.6 million of revenue reported in the second quarter of 2008 (Q2’08). The GAAP net loss for Q2’09 was $4.3 million, or a loss of $(0.05) per diluted share. This compares to a GAAP net loss of $3.9 million, or a loss of $(0.05) per diluted share, in Q2’08.

Non-GAAP net loss for Q2’09 was $1.7 million, as compared to non-GAAP net loss for Q2’08 of $2.9 million.

An archive of the August 12, 2009 conference call will be available at the Investor Relations section of Procera Networks’ website, www.proceranetworks.com, by no later than August 14, 2009.

Forward Looking Statements

Safe Harbor Statement: this press release contains forward-looking statements, including statements relating to the expected demand for Procera Networks' products and services and the recently announced purchase order from a Tier 1 service provider. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements, including risks related to the testing and acceptance of our products under the Tier 1 purchase order and during the trial period; our ability to raise capital; the acceptance and adoption of our products; our ability to service and upgrade our products; lengthy sales cycles and lab and field trial delays by service providers; our dependence on a limited product line; our dependence on key employees; our ability to compete in our industry with companies that are significantly larger and have greater resources; our ability to protect our intellectual property rights in a global market; our ability to manufacture product quickly enough to meet potential demand; and other risks and uncertainties described more fully in our 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 set forth in our Forms 10-Qs filed in 2009 and our Form 10-K filed for the year ended December 31, 2008. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

Use of Non-GAAP Financial Information 

To supplement our 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 that we believe are helpful in understanding our past financial performance and future results. For reconciliations 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." Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand and manage our business and forecast future periods. Our non-GAAP financial measures include adjustments based on the following items, as well as the related income tax benefits, if any:

Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP net income. Amortization of intangible assets is a non-cash expense, and it is not part of our core operations. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as well.

Stock-based compensation expenses: We have excluded the effect of stock-based compensation from our non-GAAP gross profit, operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.

Non-cash interest expense: We have excluded the effect of a non-cash charge to interest expense for the amortization of discounts related to convertible promissory notes that were issued and converted within Q2’09.

About Procera Networks Inc.
Procera Networks Inc. delivers Evolved DPI solutions that give service providers awareness, control and protection of their applications and networks. Its core product suite, the PacketLogic line of platforms, leverages the company's advanced identification engine, DRDL™ (Datastream Recognition Definition Language), to provide accurate identification of network traffic in real-time. PacketLogic is deployed at more than 400 broadband service providers, telcos, governments and higher education campuses worldwide. Founded in 2002, Procera (NYSE Amex: PKT) is based in Silicon Valley and has offices around the globe. More information is available at www.proceranetworks.com.

Press Contact
Jon Linden, Procera Networks, 1-408-890-7039, jon.linden@proceranetworks.com

Investor Relations Contact
Charles Constanti, Procera Networks, 1-408-890-7066, cconstanti@proceranetworks.com