updated 1/27/2011 4:17:44 PM ET 2011-01-27T21:17:44

BETHESDA, Md., Jan. 27, 2011 (GLOBE NEWSWIRE) -- OPNET Technologies, Inc. (Nasdaq:OPNT), a leading provider of solutions for application and network performance management, today announced that revenue for the third fiscal quarter, ended December 31, 2010, was $39.7 million, compared to $33.6 million for the same quarter in the prior fiscal year. Diluted earnings per share for the third quarter of fiscal 2011 were $0.19, compared to $0.11 for the same quarter in the prior fiscal year. The Company also announced today a quarterly dividend of $0.10 per share, which represents one quarter of the Company's fiscal 2011 annual dividend target of $0.40, payable on March 30, 2011 to stockholders of record as of the close of business on March 16, 2011.

Marc A. Cohen, OPNET's Chairman and CEO, stated, "We are very pleased to report strong sales execution during our third fiscal quarter. Our application performance management (APM) products continue to drive sales growth and profitability, and allowed us to achieve financial records including total revenue of $39.7 million, product revenue of $20.2 million, and operating income of $5.6 million. APM product sales accounted for 71% of our total product bookings during the quarter, and increased 45% over the same quarter last year and 22% sequentially.

Mr. Cohen continued, "We believe our growth in APM product sales is largely the result of taking market share by offering key competitive advantages, including broad coverage of the infrastructure, deep instrumentation, and superior analytics. In addition to strong sales execution during the quarter, we also completed development of our first Software-as-a-Service (SaaS) solution offering, AppMapper Xpert. This new solution automatically produces a run-time application map, identifying the underlying application and infrastructure components that enable a production application. We believe this new offering, which leverages information generated by our performance management solutions, including AppResponse Xpert and AppInternals Xpert, will further enhance our competitive position in the APM market."

The Company's third quarter fiscal 2011 financial highlights are presented below. The non-GAAP results exclude the income statement effects of stock-based compensation and acquisition-related amortization of intangible assets.  A reconciliation of GAAP results to non-GAAP results has been provided in the financial statement table following the text of the press release. For further information, please refer to the section of the press release titled "Use of Non-GAAP Measures."

GAAP Financial Highlights for the Third Quarter of Fiscal 2011:

  • Total revenue increased year-over-year 18.2% to $39.7 million from $33.6 million for the same quarter of fiscal 2010. Total revenue for the quarter increased sequentially 9.9% from $36.1 million for the second quarter of fiscal 2011.
  • Product revenue increased year-over-year by 30.3% to $20.2 million from $15.5 million for the same quarter of fiscal 2010. Product revenue for the quarter increased sequentially 14.2% from $17.7 million for the second quarter of fiscal 2011.
  • Deferred revenue increased year-over-year by 9.8% to $42.9 million from $39.1 million at the end of the same quarter of fiscal 2010. Deferred revenue for the quarter increased sequentially 6.6% from $40.2 million at the end of the second quarter of fiscal 2011.
  • Gross margin increased year-over-year to 78.8% from 75.9% for the same quarter of fiscal 2010. Gross margin increased sequentially from 76.6% in the second quarter of fiscal 2011. 
  • Operating margin increased year-over-year to 14.1% from 10.2% for the same quarter of fiscal 2010. Operating margin increased sequentially from 12.9% in the second quarter of fiscal 2011.
  • Diluted net income per common share increased year-over-year to $0.19 from $0.11 for the same quarter of fiscal 2010. Diluted net income per common share was $0.13 in the second quarter of fiscal 2011.

Non-GAAP Financial Highlights for the Third Quarter of Fiscal 2011:

  • Non-GAAP gross margin increased year-over-year to 80.3% from 77.4% for the same quarter of fiscal 2010. Non-GAAP gross margin increased sequentially from 78.0% in the second quarter of fiscal 2011.
  • Non-GAAP operating margin increased year-over-year to 17.3% from 12.9% for the same quarter of fiscal 2010. Non-GAAP operating margin increased sequentially from 15.4% in the second quarter of fiscal 2011.
  • Non-GAAP diluted net income per common share increased year-over-year to $0.23 from $0.14 for the same quarter of fiscal 2010. Non-GAAP diluted net income per common share was $0.16 in the second quarter of fiscal 2011.

Fourth Quarter Fiscal Year 2011 Financial Outlook

OPNET currently expects fiscal 2011 fourth quarter GAAP revenue to be between $37.5 million and $40.5 million, GAAP diluted net income per common share to be between $0.13 and $0.18 and non-GAAP diluted net income per common share to be between $0.16 and $0.19. The non-GAAP diluted net income per common share expectation excludes approximately $589,000 of expense associated with stock-based compensation expense, amortization of acquired intangible assets, and the related impact of these adjustments on the provision for income taxes.

OPNET will hold an investor conference call on Thursday, January 27, 2011 at 5:00 pm Eastern Time to review financial results for the third quarter of fiscal 2011.

To listen to the OPNET investor conference call:

  • Call 877-377-7550 in the U.S. or 408-337-0151 for international callers, or
  • Use the webcast at www.opnet.com . Investors are advised to go to the web site at least 15 minutes early to register, download, and install any necessary audio software.

To listen to the archived call:

  • Call the replay phone number at 800-642-1687 or 706-645-9291 for international callers. For replay, enter passcode # 37256541. The replay will be available from 8:00 pm Eastern Time January 27, 2011 through 11:59 pm Eastern Time February 3, 2011.
  • The webcast will be available at www.opnet.com , archived for seven days.  

Use of Non-GAAP Measures

OPNET uses a variety of financial measures that are not in accordance with generally accepted accounting principles, or GAAP, as supplemental measures to GAAP to evaluate its operational performance. These financial measures, which include non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per common share, exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. A detailed explanation of each of the adjustments to such financial measures is described below. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is also included below.

Management uses non-GAAP financial measures (a) to evaluate OPNET's historical and prospective financial performance as well as its performance relative to its competitors, and (b) to measure operational profitability and the accuracy of forecasting. In addition, many financial analysts who follow OPNET focus on and publish both historical results and future projections based on non-GAAP financial measures. OPNET believes that it is in the best interest of its investors to provide this information to analysts so that they accurately report the non-GAAP financial information. Moreover, investors have historically requested these non-GAAP financial measures as a means of providing consistent and comparable information with past reports of financial results.

While management believes that these non-GAAP financial measures provide useful supplemental information to investors, there are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, are not reported by all of OPNET's competitors and may not be directly comparable to similarly titled measures of OPNET's competitors due to potential differences in the exact method of calculation. OPNET compensates for these limitations by using these non-GAAP financial measures only as supplements to GAAP financial measures and by providing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

The adjustments we use to derive these non-GAAP financial measures, and the basis for such adjustments, are outlined below:

Amortization of intangibles and its related tax impact. OPNET incurs amortization of intangibles related to various acquisitions it has made in recent years. This amortization is included in the following line items of its GAAP presentation:

  • cost of revenue -- amortization of acquired technology and customer relationships
  • operating expenses -- research and development

Management excludes these expenses and their related tax impact for the purpose of calculating non-GAAP operating income, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per common share when it evaluates the continuing operational performance of OPNET because these costs are fixed at the time of an acquisition, are then amortized over a period of three to five years after the acquisition and generally cannot be changed or influenced by management after the acquisition. Accordingly, management does not consider these expenses for purposes of evaluating the performance of OPNET during the applicable time period after a given acquisition, and it excludes such expenses when evaluating OPNET's financial performance.

Stock-based compensation expense and its related tax impact. OPNET incurs expense related to stock-based compensation, which is included in the following line items of its GAAP presentation:

  • cost of revenue -- product updates, technical support and services
  • cost of revenue -- professional services
  • operating expenses -- research and development
  • operating expenses -- sales and marketing
  • operating expenses -- general and administrative

Although stock-based compensation is an expense of OPNET and is viewed as a form of compensation, management excludes these expenses for the purpose of calculating non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per common share when it evaluates the continuing operational performance of OPNET. Specifically, OPNET excludes stock-based compensation during its quarterly and annual assessments of OPNET's and management's performance. In evaluating the performance of senior management, stock-based compensation is excluded from expenditure and profitability results.

Diluted weighted average common shares outstanding.  Non-GAAP diluted net income per common share reflects the elimination of amortization of intangibles, stock-based compensation expense and the related tax impacts, all as discussed above. In addition, in cases in which the non-GAAP net income changes from negative to positive when compared to the GAAP net income, or vice versa, the non-GAAP per-share calculation also gives effect to an adjustment to the number of diluted weighted average common shares outstanding reflecting the application of the treasury method and the fact that shares previously considered anti-dilutive would now be considered dilutive, or vice versa.

About OPNET Technologies, Inc.

Founded in 1986, OPNET Technologies, Inc. (Nasdaq:OPNT) is a leading provider of application and network performance management solutions. For more information about OPNET and its products, visit www.opnet.com.

OPNET, OPNET Technologies, Inc., AppMapper Xpert, AppResponse Xpert, and AppInternals Xpert are trademarks of OPNET Technologies, Inc.  All other trademarks are the property of their respective owners.

Statements in this press release that are not purely historical facts may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. OPNET Technologies, Inc. ("OPNET") assumes no obligation to update such statements. Forward-looking statements, including statements regarding the impact of enhancements to our APM product portfolio or our competitive position and statements concerning expected revenue and diluted net income per common share and Non-GAAP diluted net income per common share for the fourth quarter of fiscal 2011, are predictions based upon information available to OPNET as of the date of this press release and involve risks and uncertainties; therefore, actual events or results may differ materially. Factors that may cause OPNET's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements include, among others, those factors listed under the caption "Risk Factors" in OPNET's Annual Report on Form 10-K for the fiscal year ended March 31, 2010, as filed with the Securities and Exchange Commission on June 4, 2010, as updated from time to time in subsequent SEC filings. The risk factors set forth in the Company's Form 10-K under the caption "Risk Factors," as updated from time to time in subsequent SEC filings, are specifically incorporated by reference into this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Note to editors: The word OPNET is spelled with all upper-case letters.

OPNET TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
         
  Three Months Ended

December 31,
Nine Months Ended

December 31,
  2010 2009 2010 2009
         
Revenue:        
 Product $20,177 $15,485 $50,822 $36,071
 Product updates, technical support, and services 13,908 11,960 39,280 34,913
 Professional services 5,593 6,110 16,779 20,926
  Total revenue 39,678 33,555 106,881 91,910
         
Cost of revenue:        
 Product 2,893 1,762 6,672 4,106
 Product updates, technical support, and services 1,269 1,172 3,827 3,575
 Professional services 3,689 4,680 12,186 14,568
 Amortization of acquired technology and customer relationships 553 459 1,511 1,376
  Total cost of revenue 8,404 8,073 24,196 23,625
         
Gross profit 31,274 25,482 82,685 68,285
         
Operating expenses:        
 Research and development 8,757 7,996 25,398 23,563
 Sales and marketing 13,265 11,360 35,117 31,701
 General and administrative 3,649 2,696 9,607 8,012
  Total operating expenses 25,671 22,052 70,122 63,276
         
Income from operations 5,603 3,430 12,563 5,009
Interest and other expense, net (54) (16) (85) (4)
Income before provision for income taxes 5,549 3,414 12,478 5,005
Provision for income taxes 1,225 1,074 3,900 1,491
Net income  $4,324 $2,340 $8,578 $3,514
         
Basic net income per common share $0.19 $0.11 $0.40 $0.17
Diluted net income per common share $0.19 $0.11 $0.38 $0.17
Basic weighted average common shares outstanding 21,608 20,540 21,263 20,572
Diluted weighted average common shares outstanding 22,230 20,823 21,921 20,786
 
OPNET TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP INCOME
(in thousands, except per share data)
(unaudited)
       
  Three Months Ended Three Months Ended 
   December 31, September 30,
  2010 2009 2010
       
GAAP gross profit $31,274 $25,482 $27,667
 Stock-based compensation expense included in cost of revenue 25 29 23
 Amortization of intangibles included in cost of revenue 552 459 499
Non-GAAP gross profit $31,851 $25,970 $28,189
       
GAAP income from operations $5,603 $3,430 $4,652
Stock-based compensation expense -- total (included in cost of revenue and in operating expenses) 664 424 389
Amortization of intangibles -- total (included in cost of revenue and in research and development expenses)  578 484 525
Non-GAAP income from operations $6,845 $4,338 $5,566
       
GAAP net income  $4,324 $2,340 $2,916
 Stock-based compensation expense -- total 664 424 389
 Amortization of intangibles -- total 578 484 525
 Provision for income tax (1) (497) (363) (366)
Non-GAAP net income  $5,069 $2,885 $3,464
       
Diluted net income per common share:      
GAAP $0.19 $0.11 $0.13
Non-GAAP  $0.23 $0.14 $0.16
       
Diluted weighted average common shares outstanding      
GAAP  22,230 20,823 21,788
Non-GAAP 22,230 20,823 21,788
(1) Reflects the tax effect of non-GAAP adjustments above at the statutory rate of 40%
 
OPNET TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except per share data)
(unaudited)
  December 31,  March 31, 
  2010 2010
ASSETS    
Current assets:    
Cash and cash equivalents  $66,026 $104,681
Marketable securities 34,951 --
Accounts receivable, net 32,084 28,015
Unbilled accounts receivable 1,902 4,765
Inventory 336 872
Deferred income taxes, prepaid expenses and other current assets 5,729 2,816
Total current assets 141,028 141,149
     
Property and equipment, net 13,017 13,245
Intangible assets, net  5,071 5,109
Goodwill  15,406 14,639
Deferred income taxes and other assets 4,402 4,210
Total assets $178,924 $178,352
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable $1,680 $1,405
Accrued liabilities  11,790 10,932
Other income taxes 312 498
Deferred rent 200 432
Deferred revenue 38,533 38,425
Total current liabilities 52,515 51,692
     
Accrued liabilities 75 145
Deferred rent 2,025 2,138
Deferred revenue 4,364 4,946
Other income taxes 594 755
Total liabilities 59,573 59,676
     
Stockholders' equity:    
Common stock 30 28
Additional paid-in capital 117,304 99,229
Retained earnings 23,745 37,920
Accumulated other comprehensive loss (882) (999)
Treasury stock, at cost  (20,846) (17,502)
Total stockholders' equity 119,351 118,676
Total liabilities and stockholders' equity $178,924 $178,352
CONTACT: OPNET Media Contact:
         Sue Cole
         OPNET Technologies, Inc.
         (919) 461-2445
         Media@opnet.com
         www.opnet.com
         
         OPNET Investor Relations:
         Mel Wesley
         OPNET Technologies, Inc.
         (240) 497-3000
         ir@opnet.com
         www.opnet.com

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