EX-99 3 ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 [LOGOC OMITTED] PRESS RELEASE Neoware Reports Fiscal Q3 Operating Results Revenues Increased 61%, Net Income Increased 82% Over Prior Year Period KING OF PRUSSIA, Pa., April 29, 2003 -- Neoware Systems, Inc. (Nasdaq: NWRE), the leading supplier of award-winning software, services, and managed thin client appliances, today reported revenues and earnings for its fiscal 2003 third quarter and nine months ended March 31, 2003. FINANCIAL HIGHLIGHTS o Revenues for the quarter ended March 31, 2003 increased 61% to $13,468,117, from $8,368,580 in the prior year quarter. o Operating income increased 244% to $2,218,136, from $645,013 in the prior year quarter. o Net income increased 82% to $1,280,821, or $0.09 per fully diluted share, from $705,058, or $0.06 per fully diluted share, in the prior year quarter. This increase in net income was achieved despite a $300,000 non-cash, non-operating impairment charge for the write-off of an investment in Boundless Corporation, which filed for Chapter 11 bankruptcy protection in March 2003. The current year quarter also had a $720,461 income tax provision, while there was no income tax provision in the prior year quarter. o Revenues for the nine months ended March 31, 2003 were $41,698,573, up 106% from $20,228,442 in the prior year. o Net income for the nine months ended March 31, 2003 was $4,611,537, up 193% from $1,575,299 in the prior year. o Gross margin for the quarter increased to a record 46% from 40% in the prior year, well above the Company's guidance of 40% to 42% plus or minus a point or two. Gross margin for the quarter increased primarily as a result of our ability to reduce product costs while increasing revenues and maintaining average selling prices, as well as a favorable product mix including increased revenues from software sales. "Neoware's business is healthy and is growing," commented Michael Kantrowitz, Neoware's Chairman and CEO. "In the first nine months of our fiscal year we have more than doubled revenues, and increased operating income more than five-fold. Our gross margins hit a new record in Q3 and were well above our plan." ADDITIONAL FINANCIAL HIGHLIGHTS o Cash flow from operations for the quarter ended March 31, 2003 was $2,539,126 compared to $247,775 in the prior year quarter. o Cash increased to $26,829,821 from $17,031,422 at June 30, 2002, primarily as a result of positive cash flow from operations and the fact that no federal income taxes were payable as a result of tax loss carryforwards and current deductions from the exercise of options by employees. o Operating margin for the quarter ended March 31, 2003 was 16%, compared to 8% in the prior year quarter as a result of increased sales, increased gross margins, and our ability to control operating expenses as we grew revenues. CUSTOMER WINS AND MARKET DATA o Specific customers sold during the quarter included Air France, Aventis, City of Wichita, Cook County, Dane County, Dufferin Peale Schools, Electrolux, Emory University Hospitals, ESPN, Federated Stores, Fenwick-Linde, Goodyear Tire and Rubber, Haverty's Furniture, HMV, IKEA, Jamestown Community College, Keystone Automotive, Lee Memorial Health System, Panalpina, State of California Dept of Human Services, Sunbelt Rentals, SuperValu Stores, UK Ministry of Defense, University of Glasgow and University of North Carolina Hospitals. o According to the most recent IDC report on the thin client market, Neoware gained more market share in 2002 than any other supplier, more than doubled its market share compared to one year ago, and grew at more than nine times the market's rate to become the number two supplier of thin client appliances and software in the US, Europe, and worldwide. "As demonstrated by these results, Neoware has a strong, profitable business," Mr. Kantrowitz commented. "While we're not immune from the economic environment or capital equipment investment trends, it is clear from our performance that Neoware's products and business model will enable us to grow revenues while generating cash flow that can be invested in our business to drive additional growth." "As demonstrated by this quarter, our operating results in any single quarter may vary as a result of the timing of individual transactions; however we believe that we are well positioned to continue to increase revenues and earnings into fiscal 2004. The fact that we deliver demonstrable cost savings to our customers - both up-front and in total ownership cost - gives us the right message for the current cost-constrained IT spending climate." Mr. Kantrowitz concluded. About Neoware Neoware provides software, services, and solutions to enable Appliance Computing, a proven Internet-based computing architecture targeted at business customers, that is designed to be simpler and easier than traditional PC-based computing. Neoware's software and management tools power and manage a new generation of smart computing appliances that utilize the benefits of open, industry-standard technologies to create new alternatives to personal computers used in business and a wide variety of proprietary business devices. Neoware's products are designed to run local applications for specific vertical markets, plus allow access across a network to multi-user Windows servers, Linux servers, mainframes, minicomputers, and the Internet. Computing appliances that run and are managed by Neoware's software offer the cost benefits of industry-standard hardware and software, easier installation, and have lower up-front, maintenance, and administrative costs than proprietary or PC-based alternatives. More information about Neoware can be found on the Web at www.neoware.com or via email at invest@neoware.com. Neoware is based in King of Prussia, PA. # # # This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding: the growth of our business; our products and business model enabling us to increase revenues and cash flow; our expectation of increases in revenues and earnings in fiscal 2004; our position as the leading supplier of software, products, services and solutions for the Appliance Computing market; the benefits of our business model; and our competitive advantage. These forward-looking statements involve risks and uncertainties. Factors that could cause actual results to differ materially from those predicted in any such forward-looking statement include our ability to continue to lower our costs, our timely development and customers' acceptance of our Appliance Computing products, including acceptance by IBM and NCD customers, NCD's creditworthiness as a distributor of our products in Europe, pricing pressures, rapid technological changes in the industry, growth of the Appliance Computing market, increased competition, our ability to attract and retain qualified personnel, our ability to identify and successfully consummate future acquisitions; adverse changes in customer order patterns, adverse changes in general economic conditions in the U.S. and internationally, risks associated with foreign operations and political and economic uncertainties associated with current world events. These and other risks are detailed from time to time in Neoware's periodic reports filed with the Securities and Exchange Commission, including, but not limited to, its report on Form 10-K for its fiscal year ended June 30, 2002 and Form 10-Q for the quarter ended December 31, 2002. Neoware is a registered trademark of Neoware Systems, Inc. All other names products and services are trademarks or registered trademarks of their respective holders. CONTACT: Vince Dolan, VP-Finance Neoware Systems, Inc. 610-277-8300 invest@neoware.com NEOWARE SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS
ASSETS March 31, 2003 June 30, 2002 (Unaudited) ------------------- ---------------- CURRENT ASSETS: Cash and cash equivalents $26,829,821 $17,031,422 Marketable securities - 183,333 Accounts receivable, net 9,315,627 9,520,558 Inventories 1,127,061 1,040,851 Prepaid expenses and other 954,156 551,598 Deferred income taxes 570,455 1,394,864 ----------- ----------- Total current assets 38,797,120 29,722,626 Property and equipment, net 562,542 622,235 Goodwill and other intangibles 11,240,494 11,568,940 Note receivable 254,269 263,732 Deferred income taxes 387,651 173,648 Capitalized software, net 25,679 47,779 ----------- ----------- $51,267,755 $42,398,960 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $3,430,942 $3,111,164 Accrued expenses 2,149,628 2,136,776 Capital lease obligations 67,065 63,037 Deferred revenue 628,331 582,290 ----------- ----------- Total current liabilities 6,275,966 5,893,267 ----------- ----------- Capital lease obligations, non-current portion 151,368 204,131 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock - - Common stock 13,870 12,936 Additional paid-in capital 44,114,915 40,291,861 Treasury stock (100,000) (100,000) Accumulated other comprehensive income (13,338) (116,672) Retained earnings (deficit) 824,974 (3,786,563) ----------- ----------- Total stockholders' equity 44,840,421 36,301,562 ----------- ----------- $51,267,755 $42,398,960 =========== ===========
NEOWARE SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended ------------------------------------ -------------------------------------- March 31, March 31, March 31, March 31, 2003 2002 2003 2002 --------------- --------------- ----------------- --------------- Net revenues $13,468,117 $8,368,580 $41,698,573 $20,228,442 Cost of revenues 7,227,380 5,061,893 23,216,958 11,862,736 ----------- ---------- ----------- ----------- Gross profit 6,240,737 3,306,687 18,481,615 8,365,706 ----------- ---------- ----------- ----------- Sales and marketing 2,410,840 1,547,448 6,937,260 4,072,802 Research and development 491,981 352,570 1,300,430 1,027,421 General and administrative 1,119,780 761,656 3,002,480 1,945,930 ----------- ---------- ----------- ----------- Operating expenses 4,022,601 2,661,674 11,240,170 7,046,153 ----------- ---------- ----------- ----------- Operating income 2,218,136 645,013 7,241,445 1,319,553 Impairment charge (300,000) - (300,000) - Interest income, net 83,146 60,045 264,081 255,746 ----------- ---------- ----------- ----------- Income before income taxes 2,001,282 705,058 7,205,526 $1,575,299 Income tax expense (720,461) - (2,593,989) - ----------- ---------- ----------- ----------- Net income $1,280,821 $705,058 $4,611,537 $1,575,299 =========== ========== =========== =========== Basic income per share $0.09 $0.06 $0.34 $0.15 =========== ========== =========== =========== Diluted income per share $0.09 $0.06 $0.31 $0.14 =========== ========== =========== =========== Weighted average number of common shares used in basic earnings per share computation 13,724,625 11,175,240 13,485,220 10,573,863 =========== ========== =========== =========== Weighted average number of common shares used in diluted earnings per share computation 14,704,171 12,509,099 14,712,321 11,326,706 =========== ========== =========== ===========
NEOWARE SYSTEMS, INC CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Nine Months Ended Ended March 31, 2003 March 31, 2003 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,280,821 $4,611,537 Adjustments to reconcile net income to net cash provided by (used in) operating activities- Loss on investment 300,000 300,000 Deferred income taxes 720,461 2,578,950 Depreciation and amortization 187,892 563,399 Changes in operating assets and liabilities- (Increase) decrease in: Accounts receivable 1,378,182 204,931 Inventories (333,640) (86,210) Prepaid expenses and other (418,428) (415,891) Increase (decrease) in: Accounts payable (842,455) 319,778 Accrued expenses 324,039 12,852 Deferred revenue (57,746) 46,041 ----------- ----------- Net cash provided by operating activities 2,539,126 8,135,387 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of intangible assets (2,114) (46,538) Purchases of property and equipment, net (27,973) (106,623) ----------- ----------- Net cash used in investing activities (30,087) (153,161) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of capital leases (18,013) (48,735) Expenses for prior issuance of common stock - (122,409) Exercise of stock options and warrants 343,342 1,977,854 Decrease in note receivable - 9,463 ----------- ----------- Net cash provided by financing activities 325,329 1,816,173 ----------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 2,834,368 9,798,399 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 23,995,453 17,031,422 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $26,829,821 $26,829,821 =========== =========== SUPPLEMENTAL DISCLOSURES: Cash paid for income taxes $- $79,947 Cash paid for interest 8,774 25,963 Cash received for interest 34,364 195,340