Tut Systems, Inc. Announces Second Quarter 2006 Results

LAKE OSWEGO, Ore., Aug. 10 /PRNewswire-FirstCall/ -- Tut Systems, Inc. , today announced its second quarter results for 2006. Revenue for the quarter ended June 30, 2006, was $8.1 million compared with revenue of $9.7 million for the quarter ended June 30, 2005. This represents a decrease in revenue of 16.3% when compared with the second quarter of 2005, and a 29.7% decrease when compared with first quarter 2006 revenue of $11.5 million. Revenue for the six months ended June 30, 2006 was $19.6 million compared with revenue of $16.7 million for the six months ended June 30, 2005. This represents a year-over-year increase in revenue of 17.3%.

Revenue related to video processing systems was $6.8 million and $6.9 million for the quarters ended June 30, 2006 and 2005, respectively. Revenue relating to private broadband network products was $1.2 million and $1.3 million for the quarters ended June 30, 2006 and 2005, respectively. Revenue related to legacy product sales from the Copper Mountain Networks merger was $0.1 million and $1.5 million for the quarters ended June 30, 2006 and 2005, respectively. International sales represented 10.4% and 15.6% of total sales for the quarters ended June 30, 2006 and 2005, respectively.

Gross profit for the quarter ended June 30, 2006, was $2.4 million, a decrease of 31.2% compared with gross profit of $3.5 million for the quarter ended June 30, 2005. Included in gross profit was a charge for amortization of intangibles of $0.4 million for each of the quarters ended June 30, 2006 and 2005. Gross profit for the six months ended June 30, 2006, was $6.3 million compared with $6.0 million for the six months ended June 30, 2005.

Gross margin for the quarter ended June 30, 2006, was 29.6%, compared with second quarter 2005 gross margin of 36.0%. Gross margin was 32.3% and 36.0% for the six months ended June 30, 2006 and 2005, respectively.

Net loss for the three months ended June 30, 2006, was $(4.6) million or $(0.14) per basic and diluted share. This compares with the net loss for the three months ended June 30, 2005, of $(4.5) million or $(0.17) per basic and diluted share. Net loss for the six months ended June 30, 2006 was $(7.8) million or $(0.23) per basic and diluted share compared with $(7.8) million or $(0.31) per basic and diluted share for the six months ended June 30, 2005.

Second Quarter Conference Call Information

Tut Systems will host a conference call on August 11, 2006 beginning at 5:30 am Pacific time to discuss its second 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 # 3722804 U.S. and Canada dial [phone] International participants dial [phone] Online at http://www.tutsys.com/ A replay will be available two hours after the call ends for one week. Dial [phone] or [phone] 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 first quarter earnings release include:

5/1/06 Tut Systems, Inc. Announces Preliminary First Quarter 2006 Results 5/2/06 Tut Systems, Kasenna, and SecureMedia Partner to Provide IPTV Solution to ComSpan Bandon 5/9/06 Tut Systems, Inc. Announces First Quarter 2006 Results 5/16/06 Tut Systems Launches World's First MPEG-4 AVC High Definition Transcoder at GLOBALCOMM 2006 5/19/06 Tut Systems CEO to Speak at the Lehman Brothers Worldwide Wireless and Wireline Conference 5/25/06 Tut Systems' Customer Cavalier Telephone Commercially Launches North America's First MPEG-4 AVC IPTV Headend 5/31/06 Tut Systems Brings Improved Reliability and Quality to CP-TEL's IPTV Headend 7/6/06 Tut Systems to Speak at the C. E. Unterberg, Towbin Emerging Growth Conference 7/12/06 Tut Systems, Inc. Announces Preliminary Second Quarter 2006 Results 7/27/06 Tut Systems, Inc. Announces Preliminary Second Quarter 2006 Results 7/28/06 Tut Systems and WEGENER Co-Sponsor Webinar on MPEG-4 Technology 8/7/06 Tut Systems CEO to Speak at the CanaccordAdams 2006 Summer Seminar 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 Six months ended June 30, June 30, 2005 2006 2005 2006 Revenue $9,674 $8,095 $16,727 $19,617 Cost of goods sold 6,194 5,701 10,709 13,272 Gross profit 3,480 2,394 6,018 6,345 Operating expenses: Sales and marketing 2,745 2,340 5,232 4,905 Research and development 3,216 2,975 5,337 6,185 General and administrative 1,965 1,417 3,124 2,680 Restructuring costs -- 359 -- 359 Amortization of intangible assets 17 17 32 34 Total operating expenses 7,943 7,108 13,725 14,163 Loss from operations (4,463) (4,714) (7,707) (7,818) Interest and other (expense) income, net (54) 71 (128) 39 Net loss $(4,517) $(4,643) $(7,835) $(7,779) Net loss per share, basic and diluted $(0.17) $(0.14) $(0.31) $(0.23) Shares used in computing net loss, basic and diluted 26,013 33,699 25,602 33,631 TUT SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) December 31, June 30, 2005 2006 ASSETS Current assets: Cash and cash equivalents $12,111 $7,353 Short-term investments 1,693 -- Accounts receivable, net 14,873 13,911 Inventories, net 6,719 11,353 Prepaid expenses and other 983 1,077 Total current assets 36,379 33,694 Property and equipment, net 2,827 2,617 Intangibles and other assets 7,977 7,147 Total assets $47,183 $43,458 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit $7,080 $7,711 Accounts payable and accrued liabilities 8,952 11,312 Deferred revenue 527 586 Total current liabilities 16,559 19,609 Note payable and other long term liabilities 4,222 4,288 Total liabilities 20,781 23,897 Stockholders' equity 26,402 19,561 Total liabilities and stockholders' equity $47,183 $43,458