PDSN Powerdsine

PowerDsine(TM) Ltd. (NASDAQ: PDSN), announced today financial results for the third quarter ended September 30, 2005. For the third quarter of 2005, sales were $10.9 million, compared to sales of $10.5 million for the second quarter of 2005, representing an increase of 4.0% and compared to $11.0 million for the third quarter of 2004. These results are in line with guidance provided during the Company's second quarter conference call. The Company reported a net profit for the third quarter of 2005 of $0.9 million, or, $0.04 per diluted share, compared with a net profit of $0.9 million, or $0.04 per diluted share, for the third quarter of 2004, and a net profit of $0.8 million, or $0.04 per diluted share, for the second quarter of 2005. Net profit for the third quarter of 2005 includes $0.5 million of non-cash stock-based compensation expense, compared to $0.6 million of non-cash stock-based compensation expense in the third quarter of 2004, and $0.5 million of non-cash stock-based compensation expense in the second quarter of 2005. Non-GAAP net income excludes the effects of non-cash stock-based compensation expense. Non-GAAP net income for the third quarter of 2005 was $1.4 million, or $0.07 per share, compared to non-GAAP net income for the third quarter of 2004 of $1.5 million, or $0.07 per share, and non-GAAP net income for the second quarter of 2005 of $1.3 million, or $0.06 per share. As of September 30, 2005, the Company had cash, cash equivalents and marketable debt securities of $77.4 million as compared to $80.8 million as of December 31, 2004. This decrease was caused primarily due to a one-time payment of withholding taxes resulting from employees' exercise of share options, which occurred during the first quarter of 2005. Commenting on the results, Igal Rotem, Chief Executive Officer of PowerDsine, said, "We are pleased to have achieved sequential growth that was in line with our expectations. The quarter was highlighted by several key accomplishments, including the expansion of our licensing program and international presence with the opening of our second Asia-Pacific office." He continued, "Of particular importance during the quarter was the creation of the IEEE 802.3at task force, of which PowerDsine will be a founding member. This task force will work towards establishing an enhanced PoE standard, capable of delivering at least 40 Watts of power from a switch. We believe that this next step in the evolution of PoE technology will serve to enhance PowerDsine's long-term growth opportunities as the range of end devices capable of utilizing PoE expands. As one of the pioneers in PoE technology and given our leadership role in establishing the first PoE standard, we believe that our experience and technical expertise will translate into advantages for PowerDsine as the standard evolves. With our pre-standard High Power over Ethernet Midspans already available, we believe we are well positioned to capitalize on the increased opportunity in the PoEPlus arena as the Task Force progresses toward a standard." Mr. Rotem concluded, "We are pleased with our achievements to date and look forward to the challenges and opportunities that lie ahead as the PoE market continues to evolve. We believe that PowerDsine has the right mix of assets for continued growth and success." Earnings Conference call The Company will host a conference call to discuss its financial results and other third quarter business developments at 8:00 a.m. EST on Tuesday, November 1, 2005. The call will be available live on the Internet at www.kcsa.com or www.powerdsine.com. Following the call, the webcast will be archived for a period of 30 days. There will be a replay available from 10:00 a.m. EST, November 1, 2005 until November 8, 2005 at 11:59 p.m. EST. To listen to the replay, please call 1-877-519-4471 in the U.S. or 1-973-341-3080 internationally. To access the replay, users will need to enter the following code: 6625852. About PowerDsine PowerDsine(TM) (NASDAQ: PDSN) designs, develops and supplies integrated circuits, modules and systems that enable the implementation of Power-over-Ethernet in local area networks, providing the capability to deliver and manage electrical power over data network cables. PowerDsine offers integrated products and system solutions to communications equipment manufacturers in the telecom and datacom industries who incorporate them into, or bundle them with, their products. For more information, please visit http://www.powerdsine.com About Power-over-Ethernet Technology PoE is a technology for wired Ethernet, the most widely installed local area network technology in use today. PoE allows the electrical power necessary for the operation of each device, to be carried by data cables rather than by separate power cords. It minimizes the number of wires that must be used in order to install the network, resulting in lower cost, less downtime, easier maintenance and greater installation flexibility. Forward Looking Statements Statements made in this press release that are not historical facts, including statements regarding our expectations of future events or our future financial performance, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions about PowerDsine and the matters covered in this release. You should not place undue reliance on these statements. Actual events or results may differ materially. Many factors may cause our actual results to differ materially from any forward looking statement, including acceptance of new products, costs relating to such products and other factors detailed in PowerDsine's filings with the Securities and Exchange Commission, including its Annual Report on Form 20-F. The forward-looking statements are made as of this date and PowerDsine does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. You may register to receive PowerDsine's future press releases or to download a complete Digital Investor Kit(TM) including press releases, regulatory filings and corporate materials by clicking on the "Digital Investor Kit(TM)" icon at www.kcsa.com. -0- *T POWERDSINE LTD. (An Israeli Corporation) CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 2005 (U.S. dollars in thousands) September 30, December 31, ------------- ------------- 2005 2004 ------------- ------------- (Unaudited) (Audited) ------------- ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 17,196 $ 15,616 Short-term marketable debt securities 25,052 28,149 Accounts receivable 11,941 7,563 Inventories 1,297 1,431 ------------- ------------ Total current assets 55,486 52,759 ------------- ------------ PROPERTY AND EQUIPMENT - net 1,863 1,623 ------------- ------------ INVESTMENTS AND OTHER LONG-TERM ASSETS 37,113 38,743 ------------- ------------ Total assets $ 94,462 $ 93,125 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES 10,647 13,827 ------------- ------------ ACCRUED SEVERANCE PAY 2,225 1,973 ------------- ------------ Total liabilities 12,872 15,800 ------------- ------------ SHAREHOLDERS' EQUITY 81,590 77,325 ------------- ------------ Total liabilities and shareholders' equity $ 94,462 $ 93,125 ============= ============ POWERDSINE LTD. (An Israeli Corporation) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS AND THREE MONTHS PERIOD ENDED SEPTEMBER 30, 2005 (U.S. dollars in thousands, except per share data) Three months ended Nine months ended September 30, September 30, ----------------------------------------------- 2005 2004 2005 2004 ---------- ----------- ----------- ---------- Unaudited Unaudited Unaudited Unaudited --------- --------- --------- --------- SALES- NET $ 10,872 $ 11,028 $ 31,397 $ 29,597 COST OF SALES 5,019 5,389 14,559 14,518 ----------- ---------- ---------- ---------- GROSS PROFIT 5,853 5,639 16,838 15,079 RESEARCH AND DEVELOPMENT EXPENSES 1,576 1,727 4,884 4,807 SELLING AND MARKETING EXPENSES 2,633 1,956 6,971 5,490 GENERAL AND ADMINISTRATIVE EXPENSES 772 744 2,620 1,779 STOCK - BASED COMPENSATION 505 580 1,502 5,415 ----------- ---------- ---------- ---------- INCOME (LOSS) FROM OPERATIONS 367 632 861 (2,412) FINANCIAL INCOME - net 587 288 1,712 339 ----------- ---------- ---------- ---------- INCOME (LOSS) FOR THE PERIOD BEFORE TAXES ON INCOME 954 920 2,573 (2,073) TAXES ON INCOME (56) (28) (126) (99) ------------ ----------- ----------- ---------- NET INCOME (LOSS) FOR THE PERIOD $ 898 $ 892 $ 2,447 $ (2,172) =========== ========== ========== ========== NET INCOME (LOSS) PER ORDINARY SHARE: Basic $ 0.05 $ 0.05 $ 0.13 $ (0.25) =========== ========== ========== ========== Diluted $ 0.04 $ 0.04 $ 0.12 $ (0.25) =========== ========== ========== ========== WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME (LOSS) PER ORDINARY SHARE: Basic 19,535,152 18,625,818 19,460,242 8,609,007 =========== ========== ========== ========== Diluted 20,770,118 20,482,645 20,721,447 8,609,007 =========== ========== ========== ========== POWERDSINE LTD. (An Israeli Corporation) Reconciliation of GAAP to Non-GAAP Financial Measures (U.S. dollars in thousands, except per share data) To supplement our consolidated financial statements presented in accordance with GAAP, the accompanying table shows a pro forma, non-GAAP, measure of net income (loss), which is adjusted from our GAAP results to exclude stock-based compensation. We have provided this non-GAAP measure to enhance the user's overall understanding of our historical financial performance and to make period to period comparisons more meaningful. Specifically, we believe this non-GAAP measure of net income (loss) provides useful information to both management and investors by excluding stock-based compensation expense. Non-GAAP net income consists of net income excluding stock based compensation expenses. As noted above, we believe that non-GAAP net income is a useful supplement to net profit and other income statement data. Non-GAAP net income should not be considered in isolation by investors as an alternative to net income. Three months ended Nine months ended September 30, September 30, ------------------------------------ 2005 2004 2005 2004 ----------------------------------- GAAP net profit (loss) - for the period $ 898 $ 892 $2,447 $(2,172) Stock-based compensation expense 505 580 1,502 5,415 -------- ------- ------ -------- Pro-forma (non-GAAP) net income- for the period $ 1,403 $ 1,472 $3,949 $ 3,243 ======== ======= ====== ======== PRO-FORMA NET INCOME PER ORDINARY SHARE: $ 0.07 $ 0.07 $ 0.18 $ 0.15 ======== ======= ====== ======== WEIGHTED AVERAGE SHARES USED IN COMPUTING PRO FORMA NET INCOME PER ORDINARY SHARE (IN MILLIONS): 21.4 21.4 21.4 21.4 ======== ======= ====== ======== *T