EX-99.1 2 a08-12799_1ex99d1.htm EX-99.1

 

Exhibit 99.1

 

 

STARENT NETWORKS, CORP. REPORTS FIRST QUARTER 2008 FINANCIAL RESULTS

 

TEWKSBURY, Mass. April 29, 2008Starent Networks, Corp. (Nasdaq: STAR), a leading provider of infrastructure solutions that enable mobile operators to deliver multimedia services, today reported financial results for the first quarter ended March 31, 2008. Net revenues for the first quarter of 2008 were $56.2 million, an increase of 103% from the first quarter of 2007.

 

Net income for the first quarter of 2008 was $9.7 million, or $0.13 per diluted share, compared to net income for the first quarter of 2007 of $2.3 million prior to income allocated to preferred shareholders, which resulted in earnings applicable to common shareholders of $0.00 per diluted share. First quarter 2008 results included $3.4 million of non-cash stock-based compensation expenses compared to similar expenses of $1.5 million in the first quarter of 2007.

 

Excluding the impact of stock-based compensation and assuming preferred shares were converted as of the beginning of the applicable period, non-GAAP net income for the first quarter of 2008 was $13.0 million, or $0.18 per diluted share, compared to non-GAAP net income for the first quarter of 2007 of $3.8 million, or $0.07 per diluted share.

 

Operational Highlights

 

Highlights for the first quarter of 2008 included several key business initiatives and milestones. In the first quarter, the company:

 

·                  Introduced its Serving GPRS Support Node (SGSN). The SGSN leverages the intelligence, performance and distributed architecture of the Starent Networks ST40 multimedia core platform to deliver market leading capabilities. The SGSN solution joins our Gateway GPRS Support Node (GGSN) to provide a more comprehensive Universal Mobile Telecommunications System (UMTS) packet core solution.

 

·                  Announced that Vodafone Germany, a division of Vodafone Group PLC, is deploying Starent’s intelligent multimedia core solutions to deliver services over its broadband network.  This solution includes both the intelligent GGSN and SGSN for their UMTS and High Speed Packet Access (HSPA) network on a 4G - ready platform.

 

·                  Announced it is leveraging its expertise in mobile multimedia networking to provide Femtocell solutions for mobile network operators worldwide.  Starent Networks’ Femtocell Gateway

 

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utilizes its high performance, intelligent multimedia core platform that is well suited to the demands of the Femtocell network.  To deliver a comprehensive solution to mobile operators,Starent Networks is partnering with technology companies for the customer premise equipment (CPE) of the Femtocell network.

 

·                  Further expanded its footprint in the Western European and Asia Pacific regions, with solutions at various stages of deployment in UMTS networks in Ireland, New Zealand and Romania.

 

Conference Call Information

 

Date:

 

April 29, 2008

Time:

 

5:00 p.m. Eastern time

Toll-free North America:

 

888-680-0894

International dial-in number:

 

617-213-4860

Passcode:

 

74365480

Live webcast:

 

Available at http://ir.starentnetworks.com

 

A telephone replay of the call will be available following the conference call through May 6, 2008.  To access the replay, parties in the United States and Canada should call 888-286-8010 and parties outside of the United States and Canada should call 617-801-6888.  The passcode for the replay is 28817111.  An archived version of the webcast will be available until June 30, 2008 on the company’s website at http://ir.starentnetworks.com.

 

About Starent Networks

 

Starent Networks, Corp. is a leading provider of infrastructure solutions that enable mobile operators to deliver multimedia services to their subscribers. Starent Networks has created solutions that provide mobile operators with the functions and services needed for access, mobility management and call control in their networks. Through integrated intelligence and high performance capabilities, Starent Networks’ solutions also enhance subscriber management, billing and session policy enforcement. The company’s products are capable of supporting a wide range of mobile wireless networks, such as UMTS, CDMA2000, WiFi and WiMAX. Starent Networks’ products have been deployed by over 65 mobile operators in 25 countries. Additional information about Starent Networks is available at www.starentnetworks.com.

 

Forward Looking Statements

 

Statements contained in this release that are not historical fact may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements may relate, among other things, to:  our position in the multimedia core network platform market; our expected financial and operating results; the amount and impact of stock-based compensation charges; our definition of “non-GAAP net income” and/or “non-GAAP net income per share”; our ability to build and expand deployments; the benefits of our products and services; and our ability to achieve our goals, plans and objectives.  Such forward-looking statements do not constitute guarantees of future performance and are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from those anticipated.  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.  The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs or develop new or enhanced products to meet those needs; the adoption rate of our products, including our new ST40 platform; our ability to establish and maintain successful relationships with our distribution partners; our reliance on a limited number of customers for a substantial portion of our

 

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revenue; our reliance on a single product line focused on a single market; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; our ability to penetrate the GSM/UMTS market; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; general political, economic and market conditions and events; 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 our business are set forth in our most recent Annual Report on Form 10-K filed with the SEC.  In addition, the forward-looking statements included in this press release represent Starent Networks’ views as of the date of this press release.  Starent Networks anticipates that subsequent events and developments will cause its views to change.  However, while Starent Networks may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so.  These forward-looking statements should not be relied upon as representing Starent Networks’ views as of any date subsequent to the date of this press release.

 

Non-GAAP Financial Measures

 

In addition to disclosing financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons why management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying table titled “Use of Non-GAAP Financial Information” as well as the related table that follows it.

 

A copy of this press release can be found on the investor relations page of Starent’s website at http://ir.starentnetworks.com.

 

# # #

 

Starent®, ST16®, and ST40™ are trademarks of Starent Networks, Corp.

 

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Starent Networks, Corp.

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

March 31,

 

December 31,

 

 

 

2008

 

2007

 

Assets

 

(unaudited)

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

282,956

 

$

223,987

 

Short-term investments

 

2,510

 

9,612

 

Accounts receivable

 

82,263

 

56,363

 

Inventories

 

33,428

 

29,638

 

Prepaid expenses and other current assets

 

5,923

 

6,656

 

Total current assets

 

407,080

 

326,256

 

 

 

 

 

 

 

Property and equipment, net

 

24,741

 

20,452

 

Other assets

 

2,059

 

1,955

 

Restricted cash

 

760

 

716

 

 

 

 

 

 

 

Total assets

 

$

434,640

 

$

349,379

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

7,326

 

$

7,448

 

Accrued expenses

 

18,282

 

21,731

 

Income taxes payable

 

940

 

1,075

 

Current portion of deferred revenue

 

128,635

 

52,733

 

Total current liabilities

 

155,183

 

82,987

 

 

 

 

 

 

 

Deferred revenue, net of current portion

 

9,573

 

10,670

 

Refundable purchase price of restricted common stock

 

713

 

783

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

69

 

68

 

Additional paid-in capital

 

353,491

 

348,917

 

Accumulated other comprehensive income

 

5

 

2

 

Accumulated deficit

 

(84,394

)

(94,048

)

Total stockholders’ equity

 

269,171

 

254,939

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

434,640

 

$

349,379

 

 



 

Starent Networks, Corp.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2008

 

2007

 

 

 

(unaudited)

 

Revenues:

 

 

 

 

 

Product

 

$

48,887

 

$

24,452

 

Service

 

7,340

 

3,190

 

Total revenues

 

56,227

 

27,642

 

Cost of revenues:

 

 

 

 

 

Product

 

9,048

 

4,438

 

Service

 

3,910

 

1,387

 

Total cost of revenues

 

12,958

 

5,825

 

Gross profit

 

43,269

 

21,817

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Research and development

 

12,343

 

10,066

 

Sales and marketing

 

18,851

 

7,069

 

General and administrative

 

5,156

 

2,844

 

Total operating expenses

 

36,350

 

19,979

 

Income from operations

 

6,919

 

1,838

 

 

 

 

 

 

 

Other income (expense), net

 

3,185

 

710

 

Income before income tax expense

 

10,104

 

2,548

 

Income tax expense

 

(450

)

(243

)

Net income

 

9,654

 

2,305

 

Accretion of redeemable convertible preferred stock

 

 

(1,997

)

Income allocated to convertible preferred stock

 

 

(262

)

Net income applicable to common stockholders

 

$

9,654

 

$

46

 

 

 

 

 

 

 

Net income per share applicable to common stockholders:

 

 

 

 

 

Basic

 

$

0.14

 

$

0.01

 

Diluted

 

$

0.13

 

$

0.00

 

 

 

 

 

 

 

Weighted-average shares used in computing  net income per common share:

 

 

 

 

 

Basic

 

68,769

 

7,719

 

Diluted

 

74,274

 

13,311

 

 

 

 

 

 

 

Stock-based compensation included in the lines above:

 

 

 

 

 

Cost of revenues

 

$

313

 

$

68

 

Research and development

 

1,304

 

481

 

Sales and marketing

 

927

 

349

 

General and administrative

 

826

 

575

 

 

 

$

3,370

 

$

1,473

 

 



 

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial statements presented on a GAAP basis, Starent uses non-GAAP measures of operating results, net income and net income per share, which are adjusted to exclude stock-based compensation expense and to give effect to the conversion of preferred stock into common stock as the beginning of the applicable accounting period. We believe these adjustments are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Starent’s underlying operating results and trends and our marketplace performance. The non-GAAP results are an indication of our baseline performance that are considered by management for the purpose of making operational decisions. In addition, these adjusted non-GAAP results are the primary indicators management uses as a basis for planning and forecasting future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or basic and diluted net income per share prepared in accordance with generally accepted accounting principles in the United States. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations.

 

 

Starent Networks, Corp.

Reconciliation of GAAP to Non-GAAP Items

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2008

 

2007

 

 

 

(unaudited)

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

Total revenues

 

$

56,227

 

$

27,642

 

Total cost of revenues

 

12,958

 

5,825

 

Gross profit

 

$

43,269

 

$

21,817

 

 

 

 

 

 

 

Adjustments to reconcile to Non-GAAP gross profit:

 

 

 

 

 

Stock-based compensation

 

313

 

68

 

Non-GAAP gross profit

 

$

43,582

 

$

21,885

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Research and development

 

$

12,343

 

$

10,066

 

Sales and marketing

 

18,851

 

7,069

 

General and administrative

 

5,156

 

2,844

 

Total operating expenses

 

$

36,350

 

$

19,979

 

 

 

 

 

 

 

Adjustments to reconcile to Non-GAAP operating expenses:

 

 

 

 

 

Stock-based compensation included in:

 

 

 

 

 

Research and development

 

$

1,304

 

$

481

 

Sales and marketing

 

927

 

349

 

General and administrative

 

826

 

575

 

 

 

 

 

 

 

Non-GAAP operating expenses:

 

 

 

 

 

Research and development

 

$

11,039

 

$

9,585

 

Sales and marketing

 

17,924

 

6,720

 

General and administrative

 

4,330

 

2,269

 

Non-GAAP operating expenses

 

$

33,293

 

$

18,574

 

 

 

 

 

 

 

Income from operations

 

$

6,919

 

$

1,838

 

 

 

 

 

 

 

Adjustments to reconcile to Non-GAAP income from operations:

 

 

 

 

 

Stock-based compensation

 

3,370

 

1,473

 

Non-GAAP income from operations

 

$

10,289

 

$

3,311

 

 



 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2008

 

2007

 

 

 

(unaudited)

 

 

 

 

 

 

 

GAAP net income

 

$

9,654

 

$

2,305

 

 

 

 

 

 

 

Adjustments to reconcile to Non-GAAP net income:

 

 

 

 

 

Stock-based compensation

 

3,370

 

1,473

 

Non-GAAP net income (1)

 

$

13,024

 

$

3,778

 

 

 

 

 

 

 

Non-GAAP net income per common share (1)

 

$

0.18

 

$

0.07

 

 

 

 

 

 

 

Weighted-average shares used in computing net income per common share:

 

 

 

 

 

Diluted

 

74,274

 

13,311

 

 

 

 

 

 

 

Redeemable convertible preferred shares on an “as-converted” basis (2)

 

 

44,288

 

Non-GAAP diluted weighted-average shares

 

74,274

 

57,599

 

 


(1)

 

Excluded amount represents stock-based compensation expense. Stock-based compensation is a non-cash expense accounted for in accordance with the fair value provisions of Statement of Financial Accounting Standards No. 123(R). While stock-based compensation is a large component of our expense, we believe investors prefer to exclude the effects of stock-based compensation expense in order to compare our financial performance with that of other companies and between time periods.

 

 

 

(2)

 

Represents common shares from the conversion of convertible preferred shares as if the shares were converted as of the beginning of the applicable period. Convertible preferred shares were converted into common shares as of June 6, 2006, the effective date of our initial public offering. We believe investors prefer to give effect to the conversion for prior periods in order to compare our financial performance with that of other companies and between time periods.

 

Source: Starent Networks, Corp.

 

Contact:
Mark Donohue
Director, Investor Relations and Assistant Treasurer
Starent Networks, Corp.
978-863-3743