TUTS Tut Systems (MM)

LAKE OSWEGO, Ore., Nov. 6 /PRNewswire-FirstCall/ -- Tut Systems, Inc. (NASDAQ:TUTS), today announced its third quarter results for 2006. Revenue for the quarter ended September 30, 2006, was $8.2 million compared with revenue of $10.0 million for the quarter ended September 30, 2005. This represents a decrease in revenue of 18.1% when compared with the third quarter of 2005, and a 1.5% increase when compared with second quarter 2006 revenue of $8.1 million. Revenue for the nine months ended September 30, 2006 was $27.8 million compared with revenue of $26.8 million for the nine months ended September 30, 2005. This represents a year-over-year increase in revenue of 4.0%. Revenue related to video processing systems was $6.9 million and $8.1 million for the quarters ended September 30, 2006 and 2005, respectively. Revenue relating to private broadband network products was $1.1 million and $1.2 million for the quarters ended September 30, 2006 and 2005, respectively. Revenue related to legacy product sales from the Copper Mountain Networks merger was $0.2 million and $0.7 million for the quarters ended September 30, 2006 and 2005, respectively. International sales represented 13.0% and 27.0% of total sales for the quarters ended September 30, 2006 and 2005, respectively. Gross profit for the quarter ended September 30, 2006, was $2.6 million, an increase of 21.0% compared with gross profit of $2.2 million for the quarter ended September 30, 2005. Included in gross profit was a charge for amortization of intangibles of $0.4 million for each of the quarters ended September 30, 2006 and 2005. Gross profit for the nine months ended September 30, 2006, was $9.0 million compared with $8.2 million for the nine months ended September 30, 2005. Gross margin for the quarter ended September 30, 2006, was 32.0%, compared with third quarter 2005 gross margin of 21.7%. Gross margin was 32.3% and 30.6% for the nine months ended September 30, 2006 and 2005, respectively. Net loss for the three months ended September 30, 2006, was $(1.3) million or $(0.04) per basic and diluted share. Net loss for the three months ended September 30, 2005 was $(5.6) million or $(0.17) per basic and diluted share. The net loss for the three months ended September 30, 2006 includes a gain related to the change in value on the convertible note derivatives of $2.5 million and amortization of the debt discount of $(0.2) million associated with the convertible notes issued on August 22, 2006. The impact of these two non-cash items was to decrease the net loss for the three months ended September 30, 2006 by $2.3 million or $0.07 per basic and diluted share. Net loss for the nine months ended September 30, 2006 was $(9.1) million or $(0.27) per basic and diluted share compared with $(13.4) million or $(0.48) per basic and diluted share for the nine months ended September 30, 2005. Third Quarter Conference Call Information Tut Systems will host a conference call on November 7, 2006 beginning at 5:30 am Pacific time to discuss its third quarter operating results, balance sheet, cash flows and current business activities. Participants of the conference call should dial in at least five minutes before the start time. Conference ID # 1298082 U.S. and Canada dial (877) 356-8058 International participants dial (706) 634-2465 Online at http://www.tutsys.com/ A replay will be available two hours after the call ends for one week. Dial (800) 642-1687 or (706) 645-9291 and enter the conference ID number. A replay will also be available at http://www.tutsys.com/. Recent Announcements: Significant announcements from Tut Systems since the second quarter earnings release include: 8/10/06 Tut Systems, Inc. Announces Second Quarter 2006 Results 8/16/06 Tut Systems Upgrades another Customer to MPEG-4 AVC 8/23/06 Tut Systems, Inc. Announces Private Placement Financing 8/24/06 Tut Systems, Inc. Announces Closing of Private Placement Financing 9/7/06 Tut Systems CEO to Present at ThinkEquity's Growth Conference 9/12/06 Tut Systems CEO to Speak at Merriman Curhan Ford Investors Summit 2006 10/24/06 Tut Systems Announces Milestone Shipments of PowerBroadband Systems to Hotels 10/31/06 Tut Systems Unveils New Offerings at TelcoTV 2006 11/1/06 Tut Systems to Release Q3 2006 Results on November 6, 2006, Followed by a Conference Call on November 7, 2006 11/2/06 Tut Systems Launches IPTV Headend with Smart City About Tut Systems, Inc. Tut Systems, Inc. delivers advanced content processing and distribution products as well as comprehensive system integration services for deploying next-generation data and video services over broadband networks. Service providers, content providers and government agencies worldwide use Tut Systems solutions to deliver broadcast-quality video over broadband networks. Tut Systems is headquartered in Lake Oswego, OR with regional offices across North America and Asia. For more information visit http://www.tutsys.com/ or call (971) 217-0400. TUT SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three months ended Nine months ended September 30, September 30, 2005 2006 2005 2006 Revenue $10,039 $8,218 $26,766 $27,835 Cost of goods sold 7,863 5,586 18,572 18,858 Gross profit 2,176 2,632 8,194 8,977 Operating expenses: Sales and marketing 2,663 1,846 7,895 6,751 Research and development 3,892 2,921 9,229 9,106 General and administrative 1,063 1,265 4,187 3,945 Restructuring costs 130 - 130 359 Amortization of intangible assets 18 17 51 51 Total operating expenses 7,766 6,049 21,492 20,212 Loss from operations (5,590) (3,417) (13,298) (11,235) Gain on convertible note derivatives - 2,483 - 2,483 Amortization of debt discount - (182) - (182) Interest and other (expense) income, net (10) (181) (139) (142) Net loss $(5,600) $(1,297) $(13,437) $(9,076) Net loss per share, basic and diluted $(0.17) $(0.04) $(0.48) $(0.27) Shares used in computing net loss, basic and diluted 32,042 33,782 27,773 33,662 TUT SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) December 31, September 30, 2005 2006 ASSETS Current assets: Cash and cash equivalents $12,111 $4,593 Short-term investments 1,693 - Accounts receivable, net 14,873 14,907 Inventories, net 6,719 11,986 Prepaid expenses and other 983 1,116 Total current assets 36,379 32,602 Property and equipment, net 2,827 2,512 Intangibles and other assets 7,977 7,186 Total assets $47,183 $42,300 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit $7,080 $4,254 Accounts payable and accrued liabilities 8,952 9,926 Deferred revenue 527 613 Convertible debt derivative liabilities - 3,509 Total current liabilities 16,559 18,302 Note payable and other long term liabilities 4,222 4,292 Convertible debt - 2,081 Total liabilities 20,781 24,675 Stockholders' equity 26,402 17,625 Total liabilities and stockholders' equity $47,183 $42,300 DATASOURCE: Tut Systems, Inc. CONTACT: Scott Spangenberg, Chief Financial Officer of Tut Systems, Inc., +1-971-217-0400, or Web site: http://www.tutsys.com/

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