AVOCENT REPORTS RECORD SALES OF $100 MILLION
FOR FOURTH QUARTER
HUNTSVILLE, Ala. (January 20, 2005) - Avocent Corporation (NASDAQ:AVCT) today reported record sales and
improved net income for the fourth quarter and year ended December 31, 2004.
“Avocent’s revenues rose 16.4% to just over $100.0 million in the
fourth quarter, our first quarter to reach $100 million in sales,” stated John R. Cooper, president and chief executive officer of Avocent Corporation. “Our record sales were due to increased demand across product lines
and geographic boundaries. Sales to OEMs were particularly strong in the fourth quarter as a result of growth in sales of our digital products and the contribution of IPMI and embedded solutions.
“Net income,
on a GAAP basis, rose to $12.1 million, or $0.23 per diluted share, an increase of 26.3% compared with the fourth quarter of last year. Our margins rose to 59.0% in the fourth quarter, over three percentage points higher
than the fourth quarter of last year. Our margin improvement reflects higher sales of digital products, contribution from IPMI and embedded solutions and continued enhancements in product design to lower our manufacturing
costs.
“We have made significant investments in R&D over the past several quarters in new products and product enhancements. These investments are paying off in terms of strengthening our KVM products,
building on our digital suite of products and broadening our markets to include software, IPMI and embedded solutions. Our sales team and operations staff deserve significant credit in translating our R&D investments
into record results for Avocent,” continued Mr. Cooper.
Fourth Quarter Results
Income prior to intangible amortization, merger-related expenses and impairment charges related to certain investments in private companies
rose 18.5% to a record $20.6 million, or $0.40 per diluted share (including a net decrease of $0.02 per share attributable to OSA), compared with income prior to intangible amortization and merger-related expenses of
$17.4 million, or $0.36 per diluted share, in the fourth quarter of 2003. (See “Use of Non-GAAP Financial Measures” discussion below.) Net adjustments to reconcile to GAAP net income were $8.6 million in the
fourth quarter of 2004, including $6.6 million in intangible amortization and $3.4 million in impairment charges related to certain investments in private companies. In addition, the adjustments included a $3.0
million tax benefit. Net adjustments to reconcile to GAAP net income were $7.9 million in the fourth quarter of 2003, including $4.8 million in amortization of intangible assets, $3.9 million in acquired in-process R&D
expenses and a $1.8 million tax benefit.
GAAP net income for the fourth quarter of 2004 was $12.1 million, or $0.23 per diluted
share. This compares with a GAAP net income of $9.6 million, or $0.20 per diluted share, in the fourth quarter of 2003.
Net sales for the fourth quarter rose 16.4% to just over $100.0 million compared with sales of
$86.0 million in the fourth quarter of 2003. Branded sales rose 15.1% from the fourth quarter of 2003 and accounted for 51.4% of sales. OEM sales rose 17.7% from the fourth quarter of 2003 and accounted for 48.6%
of total fourth quarter 2004 sales. OEM sales were strong in the fourth quarter due to increased sales of our digital product family and higher revenues from our IPMI and embedded solutions. U.S. sales increased 21.0%
to $56.6 million and international sales rose 10.8% to $43.4 million compared with the fourth quarter of 2003.
“Our sales growth benefited from increased demand for our digital products that represented 51.8% of fourth
quarter sales,” continued Mr. Cooper. “This was the first quarter that digital products represented over half our revenues. Our traditional KVM products also showed solid growth and benefited from increased demand for
newer products, including AMX and SwitchView.”
Gross profit for the fourth quarter of 2004 rose 23.0% to $59.0 million with a gross margin of 59.0%. This compared with gross profit of $48.0 million and a gross
margin of 55.8% in the fourth quarter of 2003. The increase in gross profit was due to higher sales and improved product mix, including higher sales of digital, embedded products and IPMI-enabled products.
Research
and development expenses increased 57.2% to $12.9 million, or 12.9% of sales, compared with $8.2 million, or 9.6% of sales, in the fourth quarter of 2003. This increase was due primarily to increased investment in new
product development as well as the additional engineering teams added from the acquisitions of Soronti, Crystal Link, OSA and Sonic Mobility.
“Avocent’s commitment to our research and development remains a key part in
expanding our pipeline of new products,” stated Mr. Cooper. “In the last three weeks, we made significant product announcements that provide the framework for expanding Avocent’s support of servers and related appliances
in the data center. We are very excited about the new products and the opportunities the new technologies have for broadening our markets beyond our traditional KVM appliances.
“Our recently introduced DSView3
software is an all new management platform that has been in development for over a year. DSView3 incorporates browser-based controls that allow network administrators to control servers and related appliances
anywhere-anytime. Administrators have more control, enhanced backup capabilities and improved disaster recovery through our proprietary hub and spoke architecture.
“We also just announced our new DSI 5100,
Avocent’s first branded product that incorporates OSA technology. DSI 5100 is an IPMI proxy appliance that fully integrates with the new DSView3 software and allows network administrators to monitor and manage IPMI
embedded functions on various OEMs’ servers,” continued Mr. Cooper.
“Furthermore, yesterday we announced three new serial over IP appliances which provide secure remote access and management to a wide range of devices,
such as network hubs, routers, switches and other critical network devices,” concluded Mr. Cooper.
Selling, general and administrative expenses rose 13.1% to $21.2 million compared with $18.8 million in the fourth
quarter of 2003. The increase was due to higher costs related to the addition of the Soronti, Crystal Link, OSA and Sonic Mobility sales and marketing teams, the expansion of certain sales and marketing programs, legal
fees and other costs related to protecting our intellectual property rights, and Sarbanes-Oxley Act compliance costs.
Avocent’s balance sheet and cash position remained strong as of December 31, 2004. The Company’s
cash flow from operations was approximately $25 million for the fourth quarter of 2004 with over $331 million in cash, cash equivalents and investments at the quarter’s end. Avocent had no long-term debt as of December 31,
2004.
Use of Non-GAAP Financial Measures
Income prior to intangible amortization, merger-related expenses and impairment charges related to certain investments in private companies, or operational income as used in the attached financial statement schedules, is not a measure of financial performance under generally accepted accounting principles (GAAP)
and should not be considered a substitute for or superior to GAAP. Avocent’s management uses operational income as a financial measure to evaluate performance and allocate resources within the Company. Management
believes this measure presents the Company’s results on a more comparable operational basis by excluding non-cash amortization expenses, non-operational expenses associated with mergers and acquisitions, and significant and
unusual non-recurring gains and losses on sales or impairments of investments made by Avocent. Avocent believes that operational income is a measure of performance used by some investment banks, analysts, investors and
others to make informed investment decisions. Other companies may calculate operational income in a different manner so this measure may not be comparable to similar measures presented by other companies. A
reconciliation of Avocent’s results using operational measures and GAAP is set forth in the condensed consolidated statements of operations included in this press release.
Conference Call Information
Avocent will provide an on-line, real-time Web-cast and rebroadcast of its fourth quarter results conference call to be held January 20, 2005. The live broadcast will be available on-line at www.avocent.com as well as www.vcall.com beginning at 9:00 a.m. central time. The on-line replay will follow immediately and continue for 30 days.
About Avocent Corporation
Avocent Corporation is the
leading supplier of connectivity solutions for enterprise data centers, service providers and financial institutions worldwide. Branded products include switching, extension, intelligent platform management interface
(IPMI), remote access and video display solutions. Additional information is available at: www.avocent.com.
Forward-Looking Statements
This press release
contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding the development, introduction, features, and benefits of
new products and technologies, the size and growth of the current and future markets for these products and technologies, the future effect of past acquisitions (including expected revenues and market opportunities), and
engineering and design activities. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made, including the risks associated with
general economic conditions, risks attributable to future product demand, sales, and expenses, risks associated with reliance on a limited number of customers, component suppliers, and single source components, risks associated
with acquisitions, risks associated with product design efforts and the introduction of new products and technologies, and risks associated with obtaining and protecting intellectual property rights. Other factors that
could cause operating and financial results to differ are described in Avocent’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2004. Other risks may be detailed from time to time
in reports to be filed with the SEC. Avocent does not undertake any obligation to publicly update its forward-looking statements based on events or circumstances after the date hereof.