NetHawk Reports 3Q07

Test vendor reports net sales decreased by 8.3% to €6.9M, for a net income of €100,000

November 19, 2007

3 Min Read

OULU, Finland -- INTERIM REPORT HIGHLIGHTS FROM JULY-SEPTEMBER 2007(unaudited)

  • Operating income was positive and was 0.2 million Euros, and 2.8% ofnet sales (-1.0 million Euros and -13.5 %).

  • Operating income before depreciation of consolidated goodwill was0.4 million Euros (-0.8).

  • The reported third quarter operating income includes one-timecharges of 0.2 million Euros (0.7).

  • Earnings per share were 0.003 Euros (-0.04).

  • January-September cash flow from operations was positive, 0.5million Euros (4.5).

  • Net sales decreased by 8.3% and totaled 6.9 million Euros (7.5).



MARKET ENVIRONMENT AND EVENTS DURING THE THIRD QUARTER

The market environment in the telecommunications network testingmarkets remained challenging. Manufacturer customers' investments intesting tools remained on a low level. Even though the marketsituation was demanding, NetHawk was able to make a positive resultfor the period under review by rationalizing its operations. NetHawkbelieves that it has strengthened its position in the markets. Duringthe period under review NetHawk introduced several new functionalitiessuch as support for the testing of IP-based data communication ofradio networks to NetHawk M5 and EAST product lines.

NET SALES AND RESULT IN JULY-SEPTEMBER 2007

NetHawk Group's net sales totaled 6.9 million Euros (7.5),representing a decrease of 8.3% (18.6%). Operating income was positive0.2 million Euros (-1.0), corresponding to 2.8% (-13.5%) of net sales.Other operating expenses include 0.2 million Euros (0.7) one-timecharges. The net income for the review period was 0.1 million Euros(-1.0), representing 1.2% (-13.7%) of net sales. Earnings per sharewere 0.003 Euros (-0.04).

NET SALES AND RESULT IN JANUARY-SEPTEMBER 2007

NetHawk Group's net sales totaled 20.4 million Euros (25.8),representing a decrease of 20.8% (increase 15.1%). Operating incomewas -0.9 million Euros (0.2), corresponding to -4.6% (0.9%) of netsales. The net income for the review period was -1.0 million Euros(-0.3), representing -5.1% (-1.1%) of net sales. Earnings per sharewere -0.04 Euros (-0.01). The change in the US dollar and Euroexchange rate had negative effect on net sales and net income.Of consolidated sales, 30% (28%) came from the Americas, 22% (28%)from Asia and 48% (44%) from Europe and other areas. Deferred revenuesin the balance sheet were 3.0 million Euros (2.5) at the end ofSeptember.

FINANCIAL POSITION AND INVESTMENTS

The financial position of the NetHawk Group remained good. The amountof receivables and liquid assets totaled 16.5 million Euros (18.3).Combined cash and other liquid assets totaled 5.7 million Euros (7.8).Accounts receivables totaled 9.3 million Euros (8.6) and accountspayable 1.1 million Euros (0.9).

The Group's interest-bearing net debt at the end of the review periodtotaled -5.4 million Euros (-7.2) and gearing was -25.4% (-32.1%).Long term debt accounted for 0.2 million Euros (0.4) and the equityratio was 84.4% (83.1%).

The Group's gross investments in fixed assets amounted to 2.7 millionEuros (2.4). These consist of investments in fixed assets 1.4 millionEuros (1.5) and capitalization of product development expenses of 1.3million Euros (0.9). Investments were funded through cash flow fromoperations.

FUTURE OUTLOOK

NetHawk believes that the near term market environment in thetelecommunications network testing industry will remain challenging,as manufacturer customers continue to increase the efficiency of theiroperations. The Company estimates that new technologies, such as theLTE (3GPP Long Term Evolution), will increase the demand fortelecommunications network testing solutions in the beginning of 2008.The sales of the government solutions products is also expected toincrease.

NetHawk Oyj

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