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SONICWALL REPORTS FOURTH QUARTER AND FISCAL YEAR 2004 FINANCIAL RESULTS

For Immediate Publication

SONICWALL REPORTS FOURTH QUARTER AND FISCAL YEAR 2004 FINANCIAL RESULTS


Company posts record revenue in 2004 with 33% year-over-year growth; generates $9.6 million
in net operating cash flow and returns to GAAP profitability in Q4


Sunnyvale, Calif. – February 10, 2005 – SonicWALL, Inc. (Nasdaq: SNWL), today reported revenues of $32.0 million, pro forma earnings of $0.03 per diluted share, and cash flow from operations of $9.6 million for the fourth quarter ended December 31, 2004. Revenues in the quarter increased 12% compared to revenues of $28.6 million for the same period in 2003.

Net earnings for the fourth quarter of 2004 calculated in accordance with U.S. generally accepted accounting principles (GAAP) were $735,000, or $0.01 per diluted share, compared to the GAAP net loss of $1.3 million, or $0.02 per share, during the same period of the prior year. GAAP net earnings for the fourth quarter of 2004 include $1.1 million of amortization of purchased technology in cost of goods sold, $704,000 of amortization of intangible assets in operating expenses, $156,000 in restructuring contra expense, and $30,000 of stock-based compensation contra expense. GAAP net loss for the fourth quarter of 2003 includes $1.1 million of amortization of purchased technology in cost of goods sold, $1.1 million of amortization of intangible assets in operating expenses, $164,000 in restructuring charges, and $268,000 of stock-based compensation expense.

Pro forma (non-GAAP) net earnings for the fourth quarter of 2004 were $2.4 million, or $0.03 per diluted share, compared to pro forma net earnings for the same period a year ago of $1.4 million, or $0.02 per diluted share. Pro forma net earnings and losses exclude amortization of purchased technology in cost of goods sold, amortization of intangible assets in operating expenses, restructuring charges, and stock-based compensation expense, which are described in more detail in the preceding paragraph, as well as in the unaudited financial statements attached to this press release.

SonicWALL ended its fourth quarter with $252.7 million in cash and investments. SonicWALL spent approximately $20 million in the fourth quarter out of the $50 million authorized for share repurchase.

Fiscal Year 2004 Results
For the fiscal year 2004, total revenues were $125.6 million, a 33% increase compared to revenues of $94.4 million in fiscal year 2003.

GAAP net loss for the fiscal year 2004 narrowed to $1.3 million, or $0.02 per share, compared to the GAAP net loss of $17.7 million, or $0.26 per share, in fiscal year 2003. GAAP net loss for fiscal year 2004 includes $4.5 million of amortization of purchased technology in cost of goods sold, $3.1 million of amortization of intangible assets in operating expenses, $171,000 in restructuring contra expense, and $75,000 of stock-based compensation expense. GAAP net loss for fiscal year 2003 includes $4.5 million of amortization of purchased technology in cost of goods sold, $5.3 million of amortization of intangible assets in operating expenses, $1.8 million in restructuring charges, $700,000 of stock-based compensation expense, and additional income tax benefit of $963,000.

Pro forma (non-GAAP) net earnings for fiscal year 2004 were $6.2 million, or $0.08 per diluted share, compared to pro forma net loss for fiscal year 2003 of $6.2 million, or $0.09 per share. Pro forma net earnings and losses exclude amortization of purchased technology in cost of goods sold, amortization of intangible assets in operating expenses, restructuring charges, stock-based compensation expense and income tax effect of pro forma adjustments, which are described in more detail in the preceding paragraph, as well as in the unaudited financial statements attached to this press release. “2004 was a great year for SonicWALL,” said Matthew Medeiros, president and chief executive officer of SonicWALL. “Our year-over-year organic growth rate outperformed our peer group. We gained strength in subscription sales, continued to build loyalty within our channel, and ended the year with the lowest levels of channel inventory since 2003. We believe SonicWALL is well positioned to add to this momentum in 2005.”

Guidance for Q1 2005
For the first quarter of 2005, SonicWALL expects revenues to be relatively flat compared to the fourth quarter of 2004 and pro forma earnings per share to be $0.01. On a GAAP basis, inclusive of a total of approximately $2 million in combined amortization of purchased intangibles in cost of goods sold, amortization of intangible assets in operating expenses, stock-based compensation, and restructuring charges, the Company expects loss per share to be ($0.01).

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 replay of the conference call held on February 10 to discuss fourth quarter and fiscal year 2004 results can be accessed at http://www.sonicwall.com/company/webcast.html. SonicWALL President and CEO Matt Medeiros and SonicWALL CFO Rob Selvi hosted the call.

Use of Non-GAAP Financial Measures
To supplement our consolidated financial statements presented in accordance with GAAP, SonicWALL uses non-GAAP measures of pro forma 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 accounting principles generally accepted in the United States.

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 continued ability to grow at rates higher than our peer group, our ability to increase market share, continuance of strength of subscription services, continuing to build channel loyalty, the positioning of the company for growth during calendar year 2005, and our earnings and revenue outlook for first quarter 2005. 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 the geographic areas where we do business; exchange rate fluctuations; global macroeconomic conditions; increased competition in the entry-level and mid-tier product markets and in the remote access segment of the Internet security market; new product introductions by our competitors; significant turnover of our key employees; and unpredictability of future quarters. 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, 2003 and our quarterly reports on Form 10-Q for the quarters ended subsequent to December 31, 2003. 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.

About SonicWALL, Inc.
SonicWALL, Inc. is a leading provider of integrated network security, mobility, and productivity solutions for the SMB, enterprise, e-commerce, education, healthcare, retail/point-of-sale, and government markets. Core technologies include firewall, VPN, wireless, gateway anti-virus/intrusion detection and prevention, anti-virus, and content filtering, along with award-winning security management solutions. Together, these products and technologies provide the most comprehensive distributed enforcement architecture available. SonicWALL, Inc. is headquartered in Sunnyvale, CA. SonicWALL trades on the NASDAQ exchange under the symbol SNWL. For more information, contact SonicWALL at +1 (408) 745-9600 or visit the company web site at http://www.sonicwall.com/.

Please do not hesitate to contact us for more information. For more details, please visit the SonicWALL website at http://www.sonicwall.com/General/DisplayDetails.asp?id=271

Gert Asselman
Communications Consultant
Outsource, Marketing and Communications
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