I am a bit late with the coverage of Procera's Q3 results (see "Procera Networks Announces Third Quarter 2014 Financial Results" - here and "Procera: Q3 Revenues Decline by 25% Y/Y" - here), but I thought some of the comments made during the earning call and SEC filling (here) still worth a post:
- From a high level perspective we’re seeing consolidation activity in the U.S. MSO market altering buying patterns and access to new accounts. The portion of revenue from these North American cable customers has decreased dramatically in 2014. As some of our customers prospects have entered into M&A discussions and existing customers work with equipment that had already been purchased in prior periods. Prospective new customers hunker down in anticipation and M&A activities.
- As a result we expect the North America market will contribute approximately 11% of product sales in 2014, down 33% in 2013. We have consistently said we view the U.S. cable market with caution and in hindsight we know that our view was warranted. When we originally forecasted growth in 2014 and look at the back half of the year one expected revenue contributor was a 100 gig I/O module for the PacketLogic PL20000. Today we have received great feedback from customers that have the product in trials. However as stated earlier this month, we were forced to push out general availability for this module to Q1, 2015 from Q4 of this year because one of our suppliers had delayed shipping of a component. Since then our supplier has fixed the issue and we have received delivery of the component.
- For the three months ended September 30, 2014, one customer represented 37% of net revenue, with no other single customer accounting for more than 10% of net revenue. For the nine months ended September 30, 2014, one customer represented 11% of net revenue, with no other single customer accounting for more than 10% of net revenue
- Regarding the latest announcement (see "Procera Adds Video Analytics" - here):"We announced another component this pipeline today in video perspective. Our entry into the fast growing video analytics market. With video traffic consuming as much as 60% of our customers networks, we have been adding video intelligence to our existing solutions but we felt there was a market opportunity to release a dedicated video analytics product. This market has been underserved with most solutions either delivering too little information or video analytics with limited or no subscriber context .. It's a combination [of internally developed and outsourcingand] .. we would expect margins in-line with our current margin profile.