CANTON, Mass.–(BUSINESS WIRE)–April 27, 2006–Network Engines, Inc. (NASDAQ: NENG), a leading provider of storage and security server appliance products and services, today reported financial results for its fiscal second quarter ended March 31, 2006.

Second Quarter Financial Performance

– Net revenues of $28.0 million compared to $27.3 million in the fiscal first quarter of 2006, greater than guidance of $24 million to $27 million.

– Gross profit of 15.4 percent of net revenues compared to 17.1 percent in the fiscal first quarter, within guidance of 14 to 16 percent.

– Operating expenses of $7.2 million, including $742,000 of stock-based compensation expense, below guidance of $7.8 to $8.2 million. Operating expenses compared to $6.6 million, which included $544,000 of stock-based compensation in fiscal first quarter of 2006.

– Net loss on a GAAP basis was $(2.5) million, or $(0.06) per share, which included $788,000 of stock-based compensation charges, better than the guided range of $(3.4) million to $(3.8) million on a GAAP basis. Net loss on a GAAP basis compared to $(1.6) million, or $(0.04) per share, in the first fiscal quarter of 2006.

– Non-GAAP net loss, which excludes the stock-based compensation expenses, was $(1.7) million, exceeding guidance of $(2.7) million to $(3.1) million on a non-GAAP basis. Non-GAAP net loss compared to $(1.0) million, or $(0.02) per share, in the first fiscal quarter of 2006.

– Cash, cash equivalents and short-term investments totaled $33.7 million at the close of the quarter, compared to $36.6 million at the end of December and within the guidance of $32 million and $34 million.

"During the second fiscal quarter, we achieved growth in our business, primarily attributable to better than expected performance in our OEM operations, while also making progress with our NS Series business segment," said Greg Shortell, President and Chief Executive Officer of Network Engines. "As a result, we met or exceeded the financial guidance we provided for the quarter."