Attached files

file filename
8-K - 8-K - Sonus, Inc.a15-16377_18k.htm
EX-99.2 - EX-99.2 - Sonus, Inc.a15-16377_1ex99d2.htm

Exhibit 99.1

 

 

Sonus Networks Reports 2015 Second Quarter Results

 

 

Company Provides Improved Full Year Outlook

 

For Immediate Release: July 29, 2015

 

WESTFORD, Mass. — Sonus Networks, Inc. (Nasdaq: SONS), a global leader in enabling and securing real-time communications, announced today results for the second quarter ended June 26, 2015.

 

Second Quarter 2015 Highlights

 

·                  Total Company revenue was $54.7 million, compared to $75.6 million in the second quarter of 2014.

 

·                  Product revenue was $27.0 million, compared to $45.8 million in the second quarter of 2014.

 

·                  Service revenue was $27.7 million, compared to $29.7 million in the second quarter of 2014.

 

·                  Indirect (channel) represented 26% of product revenue, compared to 29% in the second quarter of 2014.

 

·                  Enterprise represented 22% of product revenue, compared to 20% in the second quarter of 2014.

 

·                  GAAP gross margin was 62.9%; non-GAAP gross margin was 65.9%.

 

·                  GAAP operating expenses were $49.5 million; non-GAAP operating expenses were $40.9 million.

 

·                  GAAP loss per share was $0.31; non-GAAP loss per share was $0.10.

 

·                  Cash and investments were $113.5 million.

 

Ray Dolan, president and chief executive officer, commented, “Sonus’ second quarter results reflect the strength of our technology and the progress we are making against our strategic objectives, including further diversifying our customer base and expanding our presence internationally.  I’m very pleased to report that we won two new Tier-1 customers, one in Asia-Pacific and one in Central and Latin America.  Our win in Asia-Pacific is in support of SIP Trunking services for one of the largest communication service providers in the region supporting over half a billion mobile subscribers in Asia and Africa. Our win in

 



 

Central and Latin America is with one of the region’s largest mobile operators.  Both wins are for our session border control (SBC) solutions and were determined based in large part on the strength of our product and the strength of our team in each of those regions.  We also won a multi-million dollar proposal with a global telecommunications operator and IT services company headquartered in Europe which plans to leverage our SBC solution to provide Unified Communications (UC) services to their end customers.  Our commercial traction in the second quarter demonstrates that our solutions remain well-aligned with the strategies and growth requirements of our customers and partners.”

 

Mark Greenquist, chief financial officer of Sonus, said, “Gross margin and operating expenses, on a non-GAAP basis, were both better than forecast in the second quarter, allowing us to improve our earnings outlook for the year. Cash and investments of $113.5 million were also better than our forecast.  The improvement in our business, particularly compared to the previous quarter, and progress on our cost reduction initiatives enabled us to deliver positive cash flow in the second quarter, which was also ahead of schedule, and improve our earnings expectations for the second half of 2015.”

 

Cost Reduction Program On Track

 

The anticipated savings associated with the Company’s previously announced cost reduction program are on track.  The Company continues to expect to achieve approximately $20 million of annualized savings as compared to full year 2014.  The Company’s net restructuring expense in the second quarter was $1.5 million.  This reflects $2.9 million accrued for severance related to the implementation of the cost reduction plan, which was substantially lower than the $5.0 million estimated at the time the initiative was announced, offset by $1.4 million benefit in connection with the termination of a facility lease in Fremont, CA.  The Company paid $2.5 million in the second quarter of 2015 for severance-related expenses under this initiative and expects to pay the remaining $0.4 million in the third quarter of 2015.

 

Cash and Investments

 

The Company ended the second quarter of 2015 with $113.5 million in cash and investments as compared to cash and investments of $112.8 million at the end of the first quarter of 2015.

 

Second Quarter Company News

 

The Company announced several noteworthy commercial relationships and product developments during the second quarter, including:

 

On May 4, 2015, Sonus announced the completion of its multi-phase virtualization strategy with the introduction of virtual editions of Sonus Insight Element Management System (Insight EMS), Sonus DataStream Integrator (DSI), and Sonus NetScore.  Sonus now delivers a completely virtualized product portfolio to service providers and enterprises looking to virtualize their communication networks to help

 



 

reduce the time, risk and expense of introducing new services within their networks.  The portability and flexibility of these products make them the ideal choice when moving to virtualization technology.  By using common management and code base, Sonus has provided a low cost path for existing customers as they evolve their networks to virtualization architecture.

 

Also on May 4, 2015, Sonus introduced new software updates to the Sonus SBC 1000 and Sonus SBC 2000 Session Border Controllers (SBCs), designed to deliver key Microsoft Skype for Business (Enterprise Voice) functionality, as well as strategic enhancements devoted to simplify use, improve call support and bolster security during real-time Internet Protocol (IP) communications.  Sonus is focused on helping enterprises optimize Microsoft Skype for Business Enterprise Voice deployments by securing Session Initiation Protocol (SIP) trunking services at the network border and providing a more seamless flow of real-time communications.

 

On May 6, 2015, Sonus announced it expanded its Alcatel-Lucent CloudBand™ Ecosystem presence with the Sonus Diameter Signaling Controller Software edition (DSC SWe) and Sonus Network-as-a-Service (NaaS) IQ.  The Sonus DSC SWe and Sonus NaaS IQ joined the Sonus Session Border Controller Software edition (SBC SWe) with inclusion into the Alcatel-Lucent CloudBand™ Ecosystem. The Alcatel-Lucent CloudBand™ Ecosystem Program is the first open community dedicated to accelerating the market development of Network Functions Virtualization (NFV).  Sonus and the NFV community members have focused, and plan to continue to focus, on collaborating and integrating services and solutions to accelerate the adoption of NFV to create new business opportunities across the industry.

 

Also on May 6, 2015, Sonus announced a relationship with Plantronics, Nectar and Numonix to ensure full interoperability of each companies’ Microsoft Skype for Business supported network devices, offering customers a cutting edge partner ecosystem that enables, supports and enhances Microsoft Skype for Business Enterprise Voice deployments.

 

2015 Third Quarter and Full Year Outlook

 

The Company’s outlook is based on current indications for its business, which is subject to change.  Gross margin, operating expenses and earnings (loss) per share are presented on a non-GAAP basis.  A reconciliation of the non-GAAP to GAAP outlook and a statement on the use of non-GAAP financial measures are included at the end of this press release.

 



 

 

 

Q315 Guidance

 

FY15 Guidance

Total Company Revenue

 

Approx. $65 million

 

$245 million to $250 million

Gross Margin(1)

 

67.5% to 68.5%

 

Not provided

Operating Expenses(1)

 

$40 million to $41 million

 

Not provided

Earnings/(loss) per share(1)

 

$0.05 to $0.08

 

$(0.10) to $0.00

Diluted Shares

 

50.5 million

 

50.0 million

 


(1)         Presented on a non-GAAP basis.  Please see reconciliation in press release appendix.

 

Conference Call Details:

 

Date: July 29, 2015

Time: 8:30 a.m. (ET)

Dial-in number: 800 736 4594

International Callers: +1 212 231 2918

 

The company will offer a live, listen-only Webcast of the conference call via the Sonus Networks Investor Web site at http://investors.sonusnet.com/events.cfm where supporting materials, including a presentation and supplemental financial and operational data, have been posted.

 

Replay Information:

 

A telephone playback of the call will be available following the conference call until August 12, 2015 and can be accessed by calling 800 633 8284 or +1 402 977 9140 for international callers. The reservation number for the replay is 21771402.

 

Tags

 

Sonus Networks, Sonus, SONS, 2015 second quarter, earnings, results, IP-based network solutions, SBC, software SBC, session border controller, DSC, DEA, DRA, diameter signaling controller, diameter edge agent, diameter routing agent, NaaS, NaaS IQ, SDN, policy, SIP trunking, Cloud, VoIP communications, unified communications, UC, VoIP, IP, media gateway, GSX.

 

About Sonus Networks

 

Sonus brings intelligence and security to real-time communications. By helping the world embrace the next generation of cloud-based SIP and 4G/LTE solutions, Sonus enables and secures latency-sensitive, mission critical traffic for VoIP, video, instant messaging and online collaboration.  With Sonus, enterprises can give priority to real-time communications based on smart business rules while service providers can offer reliable, comprehensive and secure on-demand network services to their customers. With solutions deployed in more than 100 countries and nearly two decades of experience, Sonus offers a complete portfolio of hardware-based and virtualized Session Border Controllers (SBCs), Diameter Signaling Controllers (DSCs), Network as a Service capabilities, policy/routing servers and media and signaling gateways.  For more information, visit www.sonus.net or call 1-855-GO-SONUS.

 

Important Information Regarding Forward-Looking Statements

 

The information in this release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to a number of risks and uncertainties.  All statements other than statements of historical facts contained in this release, including statements in the sections “Cost Reduction Program On Track” and “2015 Third Quarter and Full Year Outlook” of this release; statements regarding our future results of operations and financial position, industry

 



 

developments, business strategy, plans and objectives of management for future operations; and plans for future cost reductions are forward-looking statements.  Without limiting the foregoing, the words “anticipates”, “believes”, “could”, “estimates”, “expects”, “expectations”, “intends”, “may”, “plans”, “seeks”, “projects” and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

 

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions.  Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the timing of customer purchasing decisions and our recognition of revenues; economic conditions; adjustments identified in the course of the Company’s quarter-end accounting review; our ability to recruit and retain key personnel; difficulties supporting our strategic focus on channel sales; difficulties retaining and expanding our customer base; difficulties leveraging market opportunities; the impact of cost reduction and restructuring activities; our ability to realize benefits from the Network Equipment Technologies, Inc. (NET) and Performance Technologies, Incorporated (PT) acquisitions and the Treq Labs, Inc. (Treq) asset acquisition; the effects of disruption from the PT and Treq transactions, making it more difficult to maintain relationships with employees, customers, business partners or government entities; the success implementing the integration strategies of NET, PT and Treq assets; litigation; actions taken by significant stockholders; difficulties providing solutions that meet the needs of customers; market acceptance of our products and services; rapid technological and market change; our ability to protect our intellectual property rights; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; higher risks in international operations and markets; the impact of increased competition; currency fluctuations; the impact of the reverse split of our common stock and changes in the market price of our common stock; and/or failure or circumvention of our controls and procedures.  These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.  We therefore caution you against relying on any of these forward-looking statements.  Important factors that could cause actual results to differ materially from those in these forward-looking statements are discussed in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, Part I, Item 3 “Quantitative and Qualitative Disclosures About Market Risk,” and Part II, Item 1A “Risk Factors” in the Company’s most recent Quarterly Report on Form 10-Q.  Any forward-looking statement made by us in this release speaks only as of the date of this release.  Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.  We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

 

Sonus is a registered trademark of Sonus Networks, Inc.  All other Company and product names may be trademarks of the respective companies with which they are associated.

 

Discussion of Non-GAAP Financial Measures

 

Sonus management uses a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, making operating decisions, planning and forecasting future periods, and determining payments under compensation programs.  Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is approved by our board of directors.  Continuous budgeting and forecasting for revenue and expenses are conducted on a non-GAAP basis (in addition to GAAP) and actual results on a non-GAAP basis are assessed against the annual financial plan.  We consider the use of non-GAAP financial measures helpful in assessing the core performance of our continuing operations and liquidity, and when planning and forecasting future periods.  By continuing operations we mean the ongoing results of the business excluding certain expenses and credits, including, but not limited to: cost of product revenue related to the fair value write-up of acquired inventory, stock-based compensation, amortization of intangible assets, depreciation expense related to an abandoned facility, divestiture costs, acquisition-related expense, restructuring and other income arising from the settlement of litigation related to prepaid royalties for

 



 

software licenses.  We consider the use of non-GAAP earnings (loss) per share helpful in assessing the performance of the continuing operations of our business.  While our management uses non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, GAAP measures.  In addition, our presentations of these measures may not be comparable to similarly titled measures used by other companies.  These non-GAAP financial measures should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP.

 

Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool.  In particular, many of the adjustments to Sonus’ financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

 

As part of the assessment of the assets acquired and liabilities assumed in connection with the PT acquisition, we were required to increase the aggregate fair value of acquired inventory by $1.8 million.  The acquired inventory was recorded as cost of product revenue through June 27, 2014.  We believe that excluding the incremental cost of product revenue resulting from the fair value write-up of this acquired inventory facilitates the comparison of our operating results to our historical results and to other companies in our industry.

 

Stock-based compensation is different from other forms of compensation, as it is a non-cash expense.  For example, a cash salary generally has a fixed and unvarying cash cost.  In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to us is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time.  We believe that excluding non-cash stock-based compensation expense from our operating results facilitates the comparison of our financial statements to compare our financial results to our historical operating results and to other companies in our industry.

 

We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures.  These amortization amounts are inconsistent in frequency and amount and are significantly impacted by the timing and size of acquisitions.  Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that intangible assets contribute to revenue generation.  We believe that excluding the non-cash amortization of intangible assets facilitates the comparison of our financial results to our historical operating results and to other companies in our industry as if the acquired intangible assets had been developed internally rather than acquired.

 

During the second quarter of 2015, we reached an agreement with the landlord of one of our previously restructured facilities to vacate the facility without penalty or future payments.  As a result, we were able to vacate the facility earlier than originally planned.  In connection with this settlement, we recorded $0.3 million of incremental depreciation expense to account for the change in estimated life of the fixed assets related to this facility.  We believe that excluding this incremental depreciation expense facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

 

We consider certain transition, integration and other acquisition-related costs to be unpredictable and dependent on a significant number of factors that may be outside of our control.  We do not consider these acquisition-related costs to be related to the continuing operations of the acquired business or the Company.  In addition, the size, complexity and/or volume of an acquisition, which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs.  We believe that excluding acquisition-related costs facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

 

We have recorded restructuring expense to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing our worldwide workforce.  We recorded $2.9 million of

 



 

restructuring expense in the second quarter of 2015 for severance in connection with our recently announced restructuring initiative.  We review our restructuring accruals regularly and record adjustments to these estimates as required.  We recorded such an adjustment to our results for the current quarter, the effect of which was a restructuring credit of $1.4 million in the three months ended June 26, 2015.  We recorded restructuring credits aggregating $1.8 million in the six months ended June 26, 2015.  We also recorded restructuring expense in both the three and six month periods ended June 27, 2014.  We believe that excluding restructuring expense and credits facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

 

On June 20, 2014, we sold the Multi-Protocol Server (MPS) business that we had acquired in connection with the acquisition of PT.  We incurred $0.4 million of transaction costs related to this divestiture in the second quarter of 2014.  We do not consider these divestiture costs to be related to our continuing operations.  We believe that excluding divestiture costs facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

 

In the first quarter of 2014, we recorded $2.25 million of other income related to the settlement of a litigation matter in which we recovered a portion of our losses related to the impairment of certain prepaid royalties for software licenses which we had written off in fiscal 2012.  We believe that excluding the other income arising from this settlement facilitates the comparison of our results to our historical results and to other companies in our industry.

 

We believe that providing non-GAAP information to investors, in addition to the GAAP presentation, will allow investors to view the financial results in the way management views the operating results.  We further believe that providing this information helps investors to better understand our financial performance and evaluate the efficacy of the methodology and information used by our management to evaluate and measure such performance.

 

For more information:

 

Patti Leahy

+1-978-614-8440
pleahy@sonusnet.com

 

#                                                                                         #                                                                                         #

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

 

 

 

Three months ended

 

 

 

June 26,

 

March 27,

 

June 27,

 

 

 

2015

 

2015

 

2014

 

Revenue:

 

 

 

 

 

 

 

Product

 

$

27,042

 

$

24,865

 

$

45,845

 

Service

 

27,659

 

25,280

 

29,725

 

Total revenue

 

54,701

 

50,145

 

75,570

 

 

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 

Product

 

11,269

 

11,648

 

16,811

 

Service

 

9,018

 

9,267

 

11,471

 

Total cost of revenue

 

20,287

 

20,915

 

28,282

 

 

 

 

 

 

 

 

 

Gross profit

 

34,414

 

29,230

 

47,288

 

 

 

 

 

 

 

 

 

Gross margin:

 

 

 

 

 

 

 

Product

 

58.3

%

53.2

%

63.3

%

Service

 

67.4

%

63.3

%

61.4

%

Total gross margin

 

62.9

%

58.3

%

62.6

%

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

19,968

 

19,339

 

20,921

 

Sales and marketing

 

17,540

 

19,765

 

18,782

 

General and administrative

 

10,444

 

9,224

 

11,995

 

Acquisition-related

 

24

 

107

 

 

Restructuring

 

1,487

 

(339

)

391

 

Total operating expenses

 

49,463

 

48,096

 

52,089

 

 

 

 

 

 

 

 

 

Loss from operations

 

(15,049

)

(18,866

)

(4,801

)

Interest income (expense), net

 

(20

)

28

 

50

 

Other income (expense), net

 

5

 

45

 

(10

)

 

 

 

 

 

 

 

 

Loss before income taxes

 

(15,064

)

(18,793

)

(4,761

)

Income tax provision

 

(279

)

(566

)

(736

)

 

 

 

 

 

 

 

 

Net loss

 

$

(15,343

)

$

(19,359

)

$

(5,497

)

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

Basic

 

$

(0.31

)

$

(0.39

)

$

(0.11

)

Diluted

 

$

(0.31

)

$

(0.39

)

$

(0.11

)

 

 

 

 

 

 

 

 

Shares used to compute loss per share:

 

 

 

 

 

 

 

Basic

 

49,484

 

49,423

 

49,424

 

Diluted

 

49,484

 

49,423

 

49,424

 

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

 

 

 

Six months ended

 

 

 

June 26,

 

June 27,

 

 

 

2015

 

2014

 

Revenue:

 

 

 

 

 

Product

 

$

51,907

 

$

90,985

 

Service

 

52,939

 

55,327

 

Total revenue

 

104,846

 

146,312

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

Product

 

22,917

 

30,474

 

Service

 

18,285

 

22,127

 

Total cost of revenue

 

41,202

 

52,601

 

 

 

 

 

 

 

Gross profit

 

63,644

 

93,711

 

 

 

 

 

 

 

Gross margin:

 

 

 

 

 

Product

 

55.8

%

66.5

%

Service

 

65.5

%

60.0

%

Total gross margin

 

60.7

%

64.0

%

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Research and development

 

39,307

 

39,893

 

Sales and marketing

 

37,305

 

38,363

 

General and administrative

 

19,668

 

23,181

 

Acquisition-related

 

131

 

1,306

 

Restructuring

 

1,148

 

1,560

 

Total operating expenses

 

97,559

 

104,303

 

 

 

 

 

 

 

Loss from operations

 

(33,915

)

(10,592

)

Interest income, net

 

8

 

85

 

Other income, net

 

50

 

2,325

 

 

 

 

 

 

 

Loss before income taxes

 

(33,857

)

(8,182

)

Income tax provision

 

(845

)

(1,268

)

 

 

 

 

 

 

Net loss

 

$

(34,702

)

$

(9,450

)

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

Basic

 

$

(0.70

)

$

(0.18

)

Diluted

 

$

(0.70

)

$

(0.18

)

 

 

 

 

 

 

Shares used to compute loss per share:

 

 

 

 

 

Basic

 

49,454

 

51,211

 

Diluted

 

49,454

 

51,211

 

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

June 26,

 

December 31,

 

 

 

2015

 

2014

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

34,128

 

$

41,157

 

Short-term investments

 

64,542

 

64,443

 

Accounts receivable, net

 

48,654

 

62,943

 

Inventory

 

25,699

 

22,114

 

Deferred income taxes

 

1,001

 

991

 

Other current assets

 

17,450

 

15,239

 

Total current assets

 

191,474

 

206,887

 

 

 

 

 

 

 

Property and equipment, net

 

15,473

 

17,845

 

Intangible assets, net

 

29,956

 

22,594

 

Goodwill

 

40,310

 

39,263

 

Investments

 

14,851

 

42,407

 

Deferred income taxes

 

1,012

 

1,043

 

Other assets

 

2,326

 

2,596

 

 

 

$

295,402

 

$

332,635

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

5,146

 

$

7,497

 

Accrued expenses

 

22,513

 

32,149

 

Current portion of deferred revenue

 

41,811

 

36,967

 

Current portion of long-term liabilities

 

711

 

794

 

Total current liabilities

 

70,181

 

77,407

 

 

 

 

 

 

 

Deferred revenue

 

7,652

 

8,009

 

Deferred income taxes

 

1,982

 

1,623

 

Other long-term liabilities

 

3,119

 

5,246

 

Total liabilities

 

82,934

 

92,285

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders equity:

 

 

 

 

 

Common stock

 

50

 

49

 

Additional paid-in capital

 

1,233,013

 

1,226,226

 

Accumulated deficit

 

(1,026,049

)

(991,347

)

Accumulated other comprehensive income

 

5,454

 

5,422

 

Total stockholders’ equity

 

212,468

 

240,350

 

 

 

$

295,402

 

$

332,635

 

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six months ended

 

 

 

June 26,

 

June 27,

 

 

 

2015

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(34,702

)

$

(9,450

)

Adjustments to reconcile net loss to cash flows provided by operating activities:

 

 

 

 

 

Depreciation and amortization of property and equipment

 

6,902

 

5,899

 

Amortization of intangible assets

 

3,238

 

2,207

 

Stock-based compensation

 

11,629

 

12,712

 

Loss on disposal of property and equipment

 

22

 

61

 

Deferred income taxes

 

335

 

519

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

14,223

 

8,254

 

Inventory

 

(3,590

)

4,386

 

Other operating assets

 

(1,389

)

2,698

 

Accounts payable

 

(1,994

)

(620

)

Accrued expenses and other long-term liabilities

 

(13,466

)

(4,635

)

Deferred revenue

 

4,524

 

(1,777

)

Net cash (used in) provided by operating activities

 

(14,268

)

20,254

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(4,524

)

(6,271

)

Business acquisitions, net of cash acquired

 

(10,147

)

(34,010

)

Divestiture of business

 

 

2,000

 

Purchases of marketable securities

 

(3,737

)

(47,880

)

Sale/maturities of marketable securities

 

30,620

 

134,127

 

Net cash provided by investing activities

 

12,212

 

47,966

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from sale of common stock in connection with employee stock purchase plan

 

1,668

 

1,197

 

Proceeds from exercise of stock options

 

1,739

 

4,541

 

Payment of tax withholding obligations related to net share settlements of restricted stock awards

 

(2,164

)

(1,571

)

Repurchase of common stock

 

(6,084

)

(83,518

)

Principal payments of capital lease obligations

 

(41

)

(44

)

Net cash used in financing activities

 

(4,882

)

(79,395

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(91

)

47

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(7,029

)

(11,128

)

Cash and cash equivalents, beginning of year

 

41,157

 

72,423

 

Cash and cash equivalents, end of period

 

$

34,128

 

$

61,295

 

 



 

SONUS NETWORKS, INC.

Supplemental Information

(In thousands)

(unaudited)

 

The following tables provide the details of the fair value write-up of acquired inventory, stock-based compensation, amortization of intangible assets, depreciation expense for an abandoned facility and divestiture costs included in the Company’s Condensed Consolidated Statements of Operations and the line items in which these amounts are reported.

 

 

 

Three months ended

 

 

 

June 26,

 

March 27,

 

June 27,

 

 

 

2015

 

2015

 

2014

 

Fair value write-up of acquired inventory

 

 

 

 

 

 

 

Cost of revenue - product

 

$

 

$

 

$

803

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

Cost of revenue - product

 

$

83

 

$

74

 

$

104

 

Cost of revenue - service

 

397

 

380

 

412

 

Cost of revenue

 

480

 

454

 

516

 

 

 

 

 

 

 

 

 

Research and development expense

 

1,445

 

1,358

 

1,749

 

Sales and marketing expense

 

1,852

 

1,016

 

1,303

 

General and administrative expense

 

3,032

 

1,992

 

3,370

 

Operating expense

 

6,329

 

4,366

 

6,422

 

 

 

 

 

 

 

 

 

Total stock-based compensation

 

$

6,809

 

$

4,820

 

$

6,938

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

 

 

 

Cost of revenue - product

 

$

1,176

 

$

1,168

 

$

673

 

 

 

 

 

 

 

 

 

Sales and marketing

 

415

 

479

 

505

 

Operating expense

 

415

 

479

 

505

 

 

 

 

 

 

 

 

 

Total amortization of intangible assets

 

$

1,591

 

$

1,647

 

$

1,178

 

 

 

 

 

 

 

 

 

Depreciation expense for abandoned facility

 

 

 

 

 

 

 

Research and development

 

$

324

 

$

 

$

 

 

 

 

 

 

 

 

 

Divestiture costs

 

 

 

 

 

 

 

General and administrative

 

$

 

$

 

$

405

 

 



 

SONUS NETWORKS, INC.

Supplemental Information

(In thousands)

(unaudited)

 

The following tables provide the details of the fair value write-up of acquired inventory, stock-based compensation, amortization of intangible assets, depreciation expense for an abandoned facility, divestiture costs and litigation settlement - prepaid assets included in the Company’s Condensed Consolidated Statements of Operations and the line items in which these amounts are reported.

 

 

 

Six months ended

 

 

 

June 26,

 

June 27,

 

 

 

2015

 

2014

 

Fair value write-up of acquired inventory

 

 

 

 

 

Cost of revenue - product

 

$

 

$

1,418

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

Cost of revenue - product

 

$

157

 

$

183

 

Cost of revenue - service

 

777

 

691

 

Cost of revenue

 

934

 

874

 

 

 

 

 

 

 

Research and development expense

 

2,803

 

3,062

 

Sales and marketing expense

 

2,868

 

2,552

 

General and administrative expense

 

5,024

 

6,224

 

Operating expense

 

10,695

 

11,838

 

 

 

 

 

 

 

Total stock-based compensation

 

$

11,629

 

$

12,712

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

 

Cost of revenue - product

 

$

2,344

 

$

1,304

 

 

 

 

 

 

 

Sales and marketing

 

894

 

903

 

Operating expense

 

894

 

903

 

 

 

 

 

 

 

Total amortization of intangible assets

 

$

3,238

 

$

2,207

 

 

 

 

 

 

 

Depreciation expense for abandoned facility

 

 

 

 

 

Research and development

 

$

324

 

$

 

 

 

 

 

 

 

Divestiture costs

 

 

 

 

 

General and administrative

 

$

 

$

405

 

 

 

 

 

 

 

Litigation settlement - prepaid licenses

 

 

 

 

 

Other income, net

 

$

 

$

2,250

 

 



 

SONUS NETWORKS, INC.

Reconciliation of Non-GAAP and GAAP Financial Measures - Historical

(in thousands, except percentages and per share amounts)

(unaudited)

 

 

 

Three months ended

 

 

 

June 26,

 

March 27,

 

June 27,

 

 

 

2015

 

2015

 

2014

 

 

 

 

 

 

 

 

 

GAAP gross margin - product

 

58.3

%

53.2

%

63.3

%

Stock-based compensation expense

 

0.3

%

0.3

%

0.2

%

Amortization of intangible assets

 

4.4

%

4.7

%

1.5

%

Fair value write-up of acquired inventory

 

0.0

%

0.0

%

1.8

%

Non-GAAP gross margin - product

 

63.0

%

58.2

%

66.8

%

 

 

 

 

 

 

 

 

GAAP gross margin - service

 

67.4

%

63.3

%

61.4

%

Stock-based compensation expense

 

1.4

%

1.5

%

1.4

%

Non-GAAP gross margin - service

 

68.8

%

64.8

%

62.8

%

 

 

 

 

 

 

 

 

GAAP total gross margin

 

62.9

%

58.3

%

62.6

%

Stock-based compensation expense

 

0.9

%

0.9

%

0.7

%

Amortization of intangible assets

 

2.1

%

2.3

%

0.9

%

Fair value write-up of acquired inventory

 

0.0

%

0.0

%

1.0

%

Non-GAAP total gross margin

 

65.9

%

61.5

%

65.2

%

 

 

 

 

 

 

 

 

GAAP total gross profit

 

$

34,414

 

$

29,230

 

$

47,288

 

Stock-based compensation expense

 

480

 

454

 

516

 

Amortization of intangible assets

 

1,176

 

1,168

 

673

 

Fair value write-up of acquired inventory

 

 

 

803

 

Non-GAAP total gross profit

 

$

36,070

 

$

30,852

 

$

49,280

 

 

 

 

 

 

 

 

 

GAAP research and development expense

 

$

19,968

 

$

19,339

 

$

20,921

 

Stock-based compensation expense

 

(1,445

)

(1,358

)

(1,749

)

Depreciation expense for abandoned facility

 

(324

)

 

 

Non-GAAP research and development expense

 

$

18,199

 

$

17,981

 

$

19,172

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

 

$

17,540

 

$

19,765

 

$

18,782

 

Stock-based compensation expense

 

(1,852

)

(1,016

)

(1,303

)

Amortization of intangible assets

 

(415

)

(479

)

(505

)

Non-GAAP sales and marketing expense

 

$

15,273

 

$

18,270

 

$

16,974

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

 

$

10,444

 

$

9,224

 

$

11,995

 

Stock-based compensation expense

 

(3,032

)

(1,992

)

(3,370

)

Divestiture costs

 

 

 

(405

)

Non-GAAP general and administrative expense

 

$

7,412

 

$

7,232

 

$

8,220

 

 

 

 

 

 

 

 

 

GAAP operating expenses

 

$

49,463

 

$

48,096

 

$

52,089

 

Stock-based compensation expense

 

(6,329

)

(4,366

)

(6,422

)

Amortization of intangible assets

 

(415

)

(479

)

(505

)

Depreciation expense for abandoned facility

 

(324

)

 

 

Divestiture costs

 

 

 

(405

)

Acquisition-related expense

 

(24

)

(107

)

 

Restructuring

 

(1,487

)

339

 

(391

)

Non-GAAP operating expenses

 

$

40,884

 

$

43,483

 

$

44,366

 

 

 

 

 

 

 

 

 

GAAP loss from operations

 

$

(15,049

)

$

(18,866

)

$

(4,801

)

Fair value write-up of acquired inventory

 

 

 

803

 

Stock-based compensation expense

 

6,809

 

4,820

 

6,938

 

Amortization of intangible assets

 

1,591

 

1,647

 

1,178

 

Depreciation expense for abandoned facility

 

324

 

 

 

Divestiture costs

 

 

 

405

 

Acquisition-related expense

 

24

 

107

 

 

Restructuring

 

1,487

 

(339

)

391

 

Non-GAAP income from operations

 

$

(4,814

)

$

(12,631

)

$

4,914

 

 

 

 

 

 

 

 

 

GAAP loss from operations as a percentage of revenue

 

-27.5

%

-37.6

%

-6.4

%

Fair value write-up of acquired inventory

 

0.0

%

0.0

%

1.1

%

Stock-based compensation expense

 

12.5

%

9.6

%

9.2

%

Amortization of intangible assets

 

2.9

%

3.3

%

1.6

%

Depreciation expense for abandoned facility

 

0.6

%

0.0

%

0.0

%

Divestiture costs

 

0.0

%

0.0

%

0.5

%

Acquisition-related expense

 

0.0

%

0.2

%

0.0

%

Restructuring

 

2.7

%

-0.7

%

0.5

%

Non-GAAP income (loss) from operations as a percentage of revenue

 

-8.8

%

-25.2

%

6.5

%

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(15,343

)

$

(19,359

)

$

(5,497

)

Fair value write-up of acquired inventory

 

 

 

803

 

Stock-based compensation expense

 

6,809

 

4,820

 

6,938

 

Amortization of intangible assets

 

1,591

 

1,647

 

1,178

 

Depreciation expense for abandoned facility

 

324

 

 

 

Divestiture costs

 

 

 

405

 

Acquisition-related expense

 

24

 

107

 

 

Restructuring

 

1,487

 

(339

)

391

 

Non-GAAP net income (loss)

 

$

(5,108

)

$

(13,124

)

$

4,218

 

 

 

 

 

 

 

 

 

Diluted earnings per share or (loss) per share

 

 

 

 

 

 

 

GAAP

 

$

(0.31

)

$

(0.39

)

$

(0.11

)

Non-GAAP

 

$

(0.10

)

$

(0.27

)

$

0.08

 

 

 

 

 

 

 

 

 

Shares used to compute diluted earnings per share or (loss) per share

 

 

 

 

 

 

 

GAAP shares used to compute loss per share

 

49,484

 

49,423

 

49,424

 

Non-GAAP shares used to compute diluted earnings per share or (loss) per share

 

49,484

 

49,423

 

50,031

 

 



 

SONUS NETWORKS, INC.

Reconciliation of Non-GAAP and GAAP Financial Measures - Historical

(in thousands, except percentages and per share amounts)

(unaudited)

 

 

 

Six months ended

 

 

 

June 26,

 

June 27,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

GAAP gross margin - product

 

55.8

%

66.5

%

Stock-based compensation expense

 

0.3

%

0.2

%

Amortization of intangible assets

 

4.6

%

1.4

%

Fair value write-up of acquired inventory

 

0.0

%

1.6

%

Non-GAAP gross margin - product

 

60.7

%

69.7

%

 

 

 

 

 

 

GAAP gross margin - service

 

65.5

%

60.0

%

Stock-based compensation expense

 

1.4

%

1.3

%

Non-GAAP gross margin - service

 

66.9

%

61.3

%

 

 

 

 

 

 

GAAP total gross margin

 

60.7

%

64.0

%

Stock-based compensation expense

 

0.9

%

0.6

%

Amortization of intangible assets

 

2.2

%

0.9

%

Fair value write-up of acquired inventory

 

0.0

%

1.0

%

Non-GAAP total gross margin

 

63.8

%

66.5

%

 

 

 

 

 

 

GAAP total gross profit

 

$

63,644

 

$

93,711

 

Stock-based compensation expense

 

934

 

874

 

Amortization of intangible assets

 

2,344

 

1,304

 

Fair value write-up of acquired inventory

 

 

1,418

 

Non-GAAP total gross profit

 

$

66,922

 

$

97,307

 

 

 

 

 

 

 

GAAP research and development expense

 

$

39,307

 

$

39,893

 

Stock-based compensation expense

 

(2,803

)

(3,062

)

Depreciation expense for abandoned facility

 

(324

)

 

Non-GAAP research and development expense

 

$

36,180

 

$

36,831

 

 

 

 

 

 

 

GAAP sales and marketing expense

 

$

37,305

 

$

38,363

 

Stock-based compensation expense

 

(2,868

)

(2,552

)

Amortization of intangible assets

 

(894

)

(903

)

Non-GAAP sales and marketing expense

 

$

33,543

 

$

34,908

 

 

 

 

 

 

 

GAAP general and administrative expense

 

$

19,668

 

$

23,181

 

Stock-based compensation expense

 

(5,024

)

(6,224

)

Divestiture costs

 

 

(405

)

Non-GAAP general and administrative expense

 

$

14,644

 

$

16,552

 

 

 

 

 

 

 

GAAP operating expenses

 

$

97,559

 

$

104,303

 

Stock-based compensation expense

 

(10,695

)

(11,838

)

Amortization of intangible assets

 

(894

)

(903

)

Depreciation expense for abandoned facility

 

(324

)

 

Divestiture costs

 

 

(405

)

Acquisition-related expense

 

(131

)

(1,306

)

Restructuring

 

(1,148

)

(1,560

)

Non-GAAP operating expenses

 

$

84,367

 

$

88,291

 

 

 

 

 

 

 

GAAP loss from operations

 

$

(33,915

)

$

(10,592

)

Fair value write-up of acquired inventory

 

 

1,418

 

Stock-based compensation expense

 

11,629

 

12,712

 

Amortization of intangible assets

 

3,238

 

2,207

 

Depreciation expense for abandoned facility

 

324

 

 

Divestiture costs

 

 

405

 

Acquisition-related expense

 

131

 

1,306

 

Restructuring

 

1,148

 

1,560

 

Non-GAAP income (loss) from operations

 

$

(17,445

)

$

9,016

 

 

 

 

 

 

 

GAAP loss from operations as a percentage of revenue

 

-32.3

%

-7.2

%

Fair value write-up of acquired inventory

 

0.0

%

1.0

%

Stock-based compensation expense

 

11.1

%

8.6

%

Amortization of intangible assets

 

3.1

%

1.5

%

Depreciation expense for abandoned facility

 

0.3

%

0.0

%

Divestiture costs

 

0.0

%

0.3

%

Acquisition-related expense

 

0.1

%

0.9

%

Restructuring

 

1.1

%

1.1

%

Non-GAAP income (loss) from operations as a percentage of revenue

 

-16.6

%

6.2

%

 

 

 

 

 

 

GAAP Other income, net

 

$

50

 

$

2,325

 

Litigation settlement - prepaid licenses

 

 

(2,250

)

Non-GAAP Other income, net

 

$

50

 

$

75

 

 

 

 

 

 

 

GAAP net loss

 

$

(34,702

)

$

(9,450

)

Fair value write-up of acquired inventory

 

 

1,418

 

Stock-based compensation expense

 

11,629

 

12,712

 

Amortization of intangible assets

 

3,238

 

2,207

 

Depreciation expense for abandoned facility

 

324

 

 

Divestiture costs

 

 

405

 

Acquisition-related expense

 

131

 

1,306

 

Restructuring

 

1,148

 

1,560

 

Litigation settlement - prepaid licenses

 

 

(2,250

)

Non-GAAP net income (loss)

 

$

(18,232

)

$

7,908

 

 

 

 

 

 

 

Diluted earnings per share or (loss) per share

 

 

 

 

 

GAAP

 

$

(0.70

)

$

(0.18

)

Non-GAAP

 

$

(0.37

)

$

0.15

 

 

 

 

 

 

 

Shares used to compute diluted earnings per share or (loss) per share

 

 

 

 

 

GAAP shares used to compute loss per share

 

49,454

 

51,211

 

Non-GAAP shares used to compute diluted earnings per share or (loss) per share

 

49,454

 

51,868

 

 



 

 SONUS NETWORKS, INC.

 Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook

 (in millions, except percentages and per share amounts)

 (unaudited)

 

 

 

Three months ending

 

 

 

September 25, 2015

 

 

 

Range

 

 

 

 

 

 

 

Revenue

 

$

65

 

$

65

 

 

 

 

 

 

 

Gross margin

 

 

 

 

 

GAAP outlook

 

63.9

%

64.9

%

Stock-based compensation expense

 

0.8

%

0.8

%

Amortization of intangible assets

 

2.8

%

2.8

%

Non-GAAP outlook

 

67.5

%

68.5

%

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

GAAP outlook

 

$

45.3

 

$

46.3

 

Stock-based compensation expense

 

(4.9

)

(4.9

)

Amortization of intangible assets

 

(0.4

)

(0.4

)

Non-GAAP outlook

 

$

40.0

 

$

41.0

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

GAAP outlook

 

$

(0.10

)

$

(0.07

)

Stock-based compensation expense

 

0.11

 

0.11

 

Amortization of intangible assets

 

0.04

 

0.04

 

Non-GAAP outlook

 

$

0.05

 

$

0.08

 

 

 

 

Year ending December 31, 2015

 

 

 

Range

 

 

 

 

 

 

 

Revenue

 

$

245

 

$

250

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

GAAP outlook

 

$

(0.73

)

$

(0.63

)

Stock-based compensation expense

 

0.45

 

0.45

 

Amortization of intangible assets

 

0.15

 

0.15

 

Depreciation expense for abandoned facility

 

0.01

 

0.01

 

Acquisition-related expense

 

*

 

*

 

Restructuring

 

0.02

 

0.02

 

Non-GAAP outlook

 

$

(0.10

)

$

 

 


*            Less than $0.01 impact on loss per share