TechWeb

Sonus Networks Reports 2011 First Quarter Results

May 03, 2011 (04:05 PM EDT)
URL: http://www.techweb.com/show-press-release/X843334/sonus-networks-reports-2011-first-quarter-results.html

WESTFORD, Mass., May 3, 2011 /PRNewswire/ -- Sonus Networks, Inc. (Nasdaq: SONS), a market leader in next-generation IP-based network solutions, today announced results for the quarter ended March 31, 2011 and plans for participation in upcoming financial conferences.

(Logo:  http://photos.prnewswire.com/prnh/20100928/NE71605LOGO )

Revenue for the first quarter of fiscal 2011 was $67.3 million, compared to $83.0 million in the fourth quarter of fiscal 2010 and $62.4 million in the first quarter of fiscal 2010.  The Company's net loss for the first quarter of fiscal 2011 was $12.4 million, or $0.04 per share, compared to net income of $11.4 million, or $0.04 per diluted share, for the fourth quarter of fiscal 2010 and a net loss of $0.1 million, or $0.00 per share, for the first quarter of fiscal 2010.

"I am pleased with the progress made by the team toward our annual goals, as we lay the foundation for our future," said Ray Dolan, President and Chief Executive Officer of Sonus Networks.  "We have focused on building the team, establishing channel partnerships, and expanding our NBS business.  These are important investments that we believe will drive sustained growth and innovation at Sonus."

Participation in upcoming financial conferences:

Sonus executives will participate in the following upcoming investor conferences, with presentations scheduled as follows:

Jefferies Global Technology, Internet, Media & Telecom Technology Conference

Thursday, May 12, 2011 at 11:10 a.m. ET

Barclays Capital 2011 GMT Conference

Wednesday, May 25, 2011 at 11:15 a.m. ET

Both presentations will be available via webcast.  Please visit the Investor Relations section of our website for more information.

Earnings Conference Call Details:

Sonus Networks will host a conference call for analysts and investors to discuss its first quarter 2011 results as well as certain forward-looking information today at 4:45 p.m. ET.

To listen live via telephone:
Dial-in number: 800-926-9175
International Callers: +1 212-231-2900

To listen via internet:

Sonus Networks will host a live webcast of the conference call.  To access the webcast, visit www.sonusnet.com, About Us, Investor Relations.

About Sonus Networks

Sonus Networks, Inc. is a leader in IP networking with proven expertise in delivering secure, reliable and scalable next-generation infrastructure and subscriber solutions.  With customers in over 50 countries across the globe and over a decade of experience in transforming networks to IP, Sonus has enabled service providers and enterprises to capture and retain users and generate significant ROI.  Sonus products include media and signaling gateways, policy/routing servers, session border controllers and subscriber feature servers.  Sonus products are supported by a global services team with experience in design, deployment and maintenance of some of the world's largest and most complex IP networks.  For more information, visit www.sonusnet.com.

Important Information Regarding Forward-Looking Statements

This release may contain forward-looking statements (within the meaning of the Private Securities Litigation Reform Act) regarding future events that involve risks and uncertainties.  Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results.  Readers are referred to Item 1A "Risk Factors" included in Sonus' Annual Report on Form 10-K for the year ended December 31, 2010 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements.  Any forward-looking statements represent Sonus' views only as of today and should not be relied upon as representing Sonus' views as of any subsequent date.  While Sonus may elect to update forward-looking statements at some point, Sonus specifically disclaims any obligation to do so, except as 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.

SONUS NETWORKS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)























Three months ended





March 31,


December 31,


March 31,





2011


2010


2010

Revenue:








Product

$             35,953


$             54,118


$             36,278


Service

31,346


28,861


26,130



Total revenue

67,299


82,979


62,408










Cost of revenue:







Product

23,161


17,805


12,301


Service

17,513


12,491


11,929



Total cost of revenue

40,674


30,296


24,230










Gross profit

26,625


52,683


38,178










Gross profit %







Product

35.6%


67.1%


66.1%


Service

44.1%


56.7%


54.3%



Total gross profit %

39.6%


63.5%


61.2%










Operating expenses:







Research and development

15,608


16,514


14,940


Sales and marketing

14,297


13,211


13,594


General and administrative

8,196


11,119


10,144


Restructuring

-


387


-



Total operating expenses

38,101


41,231


38,678










Income (loss) from operations

(11,476)


11,452


(500)

Interest income, net

435


182


502

Other income, net

-


-


10










Income (loss) before income taxes

(11,041)


11,634


12

income tax provision

(1,367)


(224)


(146)










Net income (loss)

$           (12,408)


$             11,410


$                (134)










Earnings (loss) per share:







Basic


$               (0.04)


$                 0.04


$                    -


Diluted

$               (0.04)


$                 0.04


$                    -










Shares used to compute earnings (loss) per share:







Basic


277,712


276,659


274,701


Diluted

277,712


278,096


274,701




SONUS NETWORKS, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)



















March 31,


December 31,





2011


2010

Assets




Current assets:





Cash and cash equivalents

$             87,152


$             62,501


Marketable securities

245,302


258,831


Accounts receivable, net

28,521


52,813


Inventory

29,114


22,499


Deferred income taxes

401


408


Other current assets

18,740


16,474



Total current assets

409,230


413,526








Property and equipment, net

21,117


21,284

Intangible assets, net

1,500


1,600

Goodwill


5,062


5,062

Investments

69,874


87,087

Deferred income taxes

1,413


1,271

Other assets

4,663


26,124





$           512,859


$           555,954








Liabilities and stockholders' equity




Current liabilities:





Accounts payable

$             17,869


$             16,936


Accrued expenses

18,272


29,999


Current portion of deferred revenue

50,493


42,776


Current portion of long-term liabilities

290


338



Total current liabilities

86,924


90,049








Deferred revenue

12,320


42,811

Long-term liabilities

4,437


4,138




Total liabilities

103,681


136,998








Commitments and contingencies











Stockholders equity:





Common stock

278


277


Additional paid-in capital

1,303,932


1,301,285


Accumulated deficit

(901,909)


(889,501)


Accumulated other comprehensive income

6,877


6,895




Total stockholders' equity

409,178


418,956





$           512,859


$           555,954











SONUS NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)






















Three months ended






March 31,


March 31,






2011


2010

Cash flows from operating activities:





Net loss


$           (12,408)


$                (134)


Adjustments to reconcile net loss to cash flows provided by (used in) operating activities:






Depreciation and amortization of property and equipment

2,850


2,458



Amortization of intangible assets

100


138



Stock-based compensation

2,026


2,486



(Gain) loss on disposal of property and equipment

(12)


57



Changes in operating assets and liabilities:







Accounts receivable

24,390


15,477




Inventory

10,425


2,852




Other operating assets

2,981


(2,098)




Accounts payable

900


3,547




Accrued expenses

(11,281)


(5,039)




Deferred revenue

(22,624)


(16,445)





Net cash provided by (used in) operating activities

(2,653)


3,299









Cash flows from investing activities:





Purchases of property and equipment

(3,165)


(1,763)


Purchase of intangible assets

-


(2,000)


Purchases of marketable securities

(42,773)


(121,856)


Sale/maturities of marketable securities

72,487


61,493





Net cash provided by (used in) investing activities

26,549


(64,126)









Cash flows from financing activities:





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

754


609


Proceeds from exercise of stock options

665


35


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

(877)


(180)


Principal payments of capital lease obligations

(26)


(55)





Net cash provided by financing activities

516


409









Effect of exchange rate changes on cash and cash equivalents

239


(44)









Net increase (decrease) in cash and cash equivalents

24,651


(60,462)

Cash and cash equivalents, beginning of year

62,501


125,323

Cash and cash equivalents, end of period

$             87,152


$             64,861











SONUS NETWORKS, INC.

Supplemental Information

(In thousands)

(unaudited)



















The following tables provide the details of stock-based compensation and amortization of intangible assets included in the Company's Condensed Consolidated Statements of Operations and the line items in which these amounts are reported.  Additional information regarding these items is available in the Investor Relations section of our website at http://www.sonusnet.com.  The information contained on our website or that can be accessed through our website should not be considered to be part of, or incorporated into, this press release.














Three months ended





March 31,


December 31,


March 31,





2011


2010


2010

Stock-based compensation







Cost of revenue - product

$                  108


$                  104


$                    71


Cost of revenue - service

385


401


419



Cost of revenue

493


505


490











Research and development expense

533


626


606


Sales and marketing expense

497


597


729


General and administrative expense

503


1,147


661



Operating expense

1,533


2,370


1,996













Total stock-based compensation

$               2,026


$               2,875


$               2,486



















Amortization of intangible assets







Cost of revenue - product

$                      -


$                  228


$                    38


Research and development

100


100


100




Total amortization of intangible assets

$                  100


$                  328


$                  138





















SONUS NETWORKS, INC.

Reconciliation of GAAP to Non-GAAP 2011 Guidance

(In millions, except percentages)

(unaudited)















The following tables include non-GAAP measures provided as guidance for 2011 derived from our GAAP (generally accepted accounting principles in the United States) 2011 expected results.  This non-GAAP guidance for gross margin and operating expenses is not presented in accordance with, nor is it intended to be a substitute for, GAAP.  In addition, our presentations of these measures may not be comparable to similarly titled measures used by other companies.  The non-GAAP measures provided as guidance should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP.












Range





Low

to

High








Revenue


$                  265


$                  285








Reconciliation of GAAP to Non-GAAP 2011 Guidance - Gross Margin





GAAP expected results

58%


62%


Stock-based compensation

1%


1%



Non-GAAP guidance

59%


63%















Reconciliation of GAAP to Non-GAAP 2011 Guidance - Operating Expenses





GAAP expected results

$                  151


$                  155


Stock-based compensation

(8)


(8)


Amortization of intangible assets (A)

-


-



Non-GAAP guidance

$                  143


$                  147





























(A) The impact of expense for amortization of intangible assets on non-GAAP operating expenses is expected to approximate $100,000 per quarter.



SONUS NETWORKS, INC.

Reconciliation of Non-GAAP and GAAP Financial Information

(In thousands, except per share data)

(unaudited)



















The tables below include non-GAAP financial measures derived from our Condensed Consolidated Statements of Operations.  These non-GAAP financial measures of Gross profit, Gross margin and Operating expenses are not presented in accordance with, nor are they intended to be a substitute for, accounting principles generally accepted in the United States of America (“GAAP”).  In addition, our presentations of these measures may not be comparable to similarly titled measures used by other companies.  The non-GAAP financial measures described below, should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP.


We use a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, planning and forecasting future periods, and determining payments under compensation programs.  We consider the use of these non-GAAP financial measures helpful in assessing the core performance of our continuing operations and liquidity, and when planning and forecasting future periods.  These items for the periods presented are Stock-based compensation expense, Amortization of intangible assets and Restructuring.


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 the Company’s GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in the Company’s financial results for the foreseeable future.























Three months ended





March 31,


December 31,


March 31,



Notes


2011


2010


2010










GAAP Total gross profit



$             26,625


$             52,683


$             38,178

Stock-based compensation expense

A


493


505


490

Amortization of intangible assets

B


-


228


38

Non-GAAP Total gross profit



$             27,118


$             53,416


$             38,706










GAAP Total gross margin



39.6%


63.5%


61.2%

Stock-based compensation expense

A


0.7%


0.6%


0.8%

Amortization of intangible assets

B


0.0%


0.3%


0.0%

Non-GAAP Total gross margin



40.3%


64.4%


62.0%










GAAP Operating expenses



$             38,101


$             41,231


$             38,678

Stock-based compensation expense

A


(1,533)


(2,370)


(1,996)

Amortization of intangible assets

B


(100)


(100)


(100)

Restructuring

C


-


(387)


-

Non-GAAP Operating expenses



$             36,468


$             38,374


$             36,582




























A  Stock-based compensation is different from other forms of compensation, as it is a non-cash expense.  A cash salary or bonus has a fixed and unvarying cash cost.  In contrast, the expense associated with the award of an option 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 enables the readers of our financial statements to more accurately compare our operating results to our historical results and to other companies in our industry.


B  On January 15, 2010, we entered into an intellectual property asset purchase and license agreement with Winphoria, Inc. (“Winphoria”) and Motorola, Inc. (“Motorola”) to purchase certain of Winphoria’s software code and related patents and licensed certain other intellectual property from Winphoria and Motorola.  The purchase price included an initial payment of $2.0 million and future potential royalty payments dependent upon future sales of certain of our products  that include the Winphoria technology that was purchased or licensed.  In connection with this transaction we recorded identifiable intangible assets which we have classified as developed technology and that will be amortized on a straight-line basis over five years, the expected useful life of the technology.  The amortization expense for these identifiable intangible assets is included in Amortization of intangible assets.  


On April 13, 2007, we completed our acquisition of Zynetix Limited (“Zynetix”), a privately-held designer of innovative Global System for Mobile Communications infrastructure solutions located in the United Kingdom.  In connection with this acquisition we recorded intangible assets consisting of customer relationships, intellectual property and a trade name.  A portion of the Intellectual property was allocated to the Sonus reporting unit.  During the third quarter of fiscal 2008, we committed to a plan to sell Zynetix, and completed the sale transaction on November 26, 2008.  The amortization expense for the intellectual property allocated to the Sonus reporting unit is included in Amortization of intangible assets.


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 and provides meaningful information regarding our liquidity.


C  We recorded restructuring expense in the three months ended December 31, 2010 related to closing our office in Ottawa, Canada.  We believe that excluding this restructuring expense facilitates the comparison of our financial results to our historical operating results and to other companies in our industry and provides meaningful information regarding our liquidity.




For more information, please contact:


Wayne Pastore
978-614-8291
wpastore@sonusnet.com

Fran Murphy
978-614-8148
fmurphy@sonusnet.com




SOURCE Sonus Networks, Inc.