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Original Source: FD (FAIR DISCLOSURE) WIRE
. Denise Franklin, SonicWALL, Inc., Director of IR . Matt Medeiros, SonicWALL, Inc., President & CEO . Rob Selvi, SonicWALL, Inc., CFO
In 2004, SNWL generated record revenue of $125.6m. 4Q04 was SNWL's strongest qtr. in 2004 as it relates to the percentage of revenue from subscriptions, services, and profitability. 4Q04 total revenues were $125.6m vs. $94.4m in FY03. For 1Q05, SNWL expects revenue to be relatively flat vs. 4Q04, and pro forma EPS to be $0.01. Q&A Focus: Financials, sales and marketing, and guidance.
A. Key Data From Call 1. 2004 revenue = $125.6m. 2. 4Q04 Pro forma or non-GAAP net earnings = $6.2m. 3. 4Q04 GAAP net loss = $1.3m.
4. 4Q04 GAAP net earnings = $735,000. 5. 4Q04 Pro forma OpEx = $21.7m. 6. 1Q05 expected pro forma EPS = $0.01.
S1. Business Overview (M.M.) 1. Highlights: 1. In 2004, SNWL generated record revenue of $125.6m, up 33% over 2003. 1. This milestone was accomplished through execution of the plan that the Co. outlined last year. 2. At that time, the Co. said that it would build its reputation on value innovation by making the complex, simple; the expensive, affordable; and the technology
understandable and useful. 3. SNWL said that it would continue to strengthen its channel leadership. 4. The Co. said that it would focus on global markets, and that it would position itself to bring value innovation to new markets. 5. SNWL has successfully transitioned its revenue composition. 2. Today, SNWL is a provider of integrated solutions where sales consist of long-term relationships with its customers and includes hardware, subscriptions, and support. 1. No longer is SNWL a narrow-based firewall/VPN hardware co., where business consisted of a series of one-time transactions.
3. All regions of the world set revenue records. 4. Licenses, subscriptions and support continued their outstanding performance with revenue increasing 50% over 2003. 5. Deferred revenue grew 57% YoverY. 1. SNWL did this while it weaned itself off of OEM revenue from its competitors Cisco and 3Com. 6. Pro forma GM increased to 70% from 64% in 2003. 7. Operating margins were a positive 2% vs. a negative 12% in 2003. 8. Pro forma net earnings reached $6.2m vs. a loss of $6m in 2003. 9. The Co. was profitable on a pro forma basis throughout 2004 and reached GAAP profitability in 4Q04. 10. SNWL ended the year with slightly over $250m in cash and generated approx. $17.5m in cash from operations, $9.6m of which was generated in 4Q04.
2. 2004 Achievements: 1. Achievements have been recognized by channel partners and by third parties who rate the highest achievers in the security industry. 2. Awards: 1. SNWL was named the Best Business Turnaround at the American Business Awards.
2. SNWL won the top award in the security category in the VARBusiness Annual Report Card program. 1. The reseller community gave SNWL their highest votes in the fiercely competitive securities category. 2. This award recognized SNWL for product innovation, partnership, and loyalty and it won in the overall category. 3. VARBusiness also gave the Co.'s channel partner program its coveted Five-Star Rating. 3. SNWL recently was featured in a cover story by CRN Magazine and given the advocate (Phonetic) accolade for its channel
focus. 4. PRO 2040, the most popular product in the PRO family was recognized by InfoWorld as a security technology that will have the most impact in transforming information technology in 2005. 1. This is a significant award because security is still the top concern of IT managers according to a recent study by IDC. 2. Because of this concern, IT managers will be looking for the best products such as the Co.'s PRO family to protect their networks.
3. 4Q04 Performance: 1. 4Q04 was SNWL's strongest qtr. in 2004 as it relates to the percentage of revenue from subscriptions, services, and profitability. 2. SNWL generated revenues of $32m, an increase of 12% over 4Q03. 3. The Co. shipped over 39,000 revenue units vs. 35,000 in 3Q04. 4. The Co. continues to experience robust growth in subscription sales. 5. License, subscriptions, and support revenue grew for the ninth qtr. in a row and constituted a record 39% of quarterly revenue. 6. Deferred revenue grew 57% from 4Q03 due to increased billings
of subscriptions. 1. Gateway anti-virus spurred this growth along with intrusion prevention, content filtering, and enforced client anti-virus. 7. Domestic and international sales were both strong in 4Q04, growing in absolute dollars sequentially and over 4Q03. 8. Europe: 1. 4Q04 reinforced the positive effects from rationalization of the Co.'s European channel. 2. SNWL has gone from 54 distributors at the beginning of 2004 to 15 allowing it to put more focus on the value added resellers in Europe. 1. As a result of this rationalization, Europe closed its highest sales out qtr. in SNWL's history. 3. Germany, in particular, showed extremely strong sales out. 4. Channel inventory in Europe was at its lowest level since 3Q03. 5. European revenue in 4Q04 was 59% higher than what it was in 3Q03. 6. PRO product sales were particularly strong in Europe. 7. The number of units sold increased 100% sequentially. 8. The PRO family has attracted several significant customers in Europe. 1. A leading retailer in Europe purchased 125 of the Co.'s PRO 4060s and the French Institute of Research and Development placed an initial order for 16 of the
gigabit-class PRO 5060s. 9. SNWL is also attracting top network and systems integrators in Europe such as IBM Global Services, Infonet, and EDS. 9. Asia Pacific and Japan: 1. Sales in this region are benefiting from channel enhancements that have taken place over the past year. 2. SNWL has added regional distributors such as SoftBank in Japan, Accton in Greater China and Taiwan, ACA Pacific
serving Australia and Southeast Asia, and Ingram Micro, Australia. 1. These efforts bore fruit in 4Q04. 3. A reseller completed a transaction with a leading financial institution …