EX-99.1 2 a16-15545_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

Sonus Networks Reports 2016 Second Quarter Results

 

 

For Immediate Release: July 27, 2016

 

WESTFORD, Mass. — Sonus Networks, Inc. (Nasdaq: SONS), a global leader in secure and intelligent Cloud communications, today announced results for the second quarter ended June 30, 2016.

 

Second Quarter 2016 Highlights

 

·                  Total Company revenue was $60.9 million, compared to $54.7 million in the second quarter of 2015.

 

·                  Product revenue was $35.4 million, compared to $27.0 million in the second quarter of 2015.

 

·                  Service revenue was $25.5 million, compared to $27.7 million in the second quarter of 2015.

 

·                  GAAP gross margin was 66.1%, compared to 62.9% in the second quarter of 2015.

 

·                  Non-GAAP gross margin was 69.2%, compared to 65.9% in the second quarter of 2015.

 

·                  GAAP operating expenses were $42.9 million, compared to $49.5 million in the second quarter of 2015.

 

·                  Non-GAAP operating expenses were $37.8 million, compared to $40.9 million in the second quarter of 2015.

 

·                  GAAP loss per share was $0.06, compared to a GAAP loss per share of $0.31 in the second quarter of 2015.

 

·                  Non-GAAP earnings per share was $0.08, compared to a non-GAAP loss per share of $0.10 in the second quarter of 2015.

 

·                  Cash and investments were $142.7 million, compared to $142.4 million at the end of the first quarter of 2016.

 

“I am very pleased with our financial performance in the second quarter of 2016 as we exceeded all metrics related to our financial guidance that we provided on our first quarter of 2016 earnings call,” said Ray Dolan, Sonus president and CEO.  “Total revenue grew 11% compared to the second quarter of 2015.  We continued to have a strong pipeline and we had a solid book-to-bill ratio in the second quarter of 2016.”

 

“Our second quarter results set us up for a strong year, as we consistently invest in the future,” continued Dolan.  “The Company is executing at a rapid pace and continues to deliver industry-leading, secure, reliable and scalable real-time communications solutions to our service provider and enterprise customers.  Our focus moving forward will be to improve profitability as the industry migrates to the Cloud.”

 

Susan Villare, Sonus interim CFO, commented, “Our solid gross margin performance combined with lower operating expenses resulted in a GAAP loss per share of $0.06 compared to a GAAP loss per share of $0.31 in the second quarter of 2015. Non-GAAP diluted earnings per share was $0.08,

 



 

compared to our guidance of $0.03 to $0.04. GAAP and non-GAAP gross margins in the second quarter of 2016 increased 320 basis points and 330 basis points, respectively, versus the comparable period last year. Our second quarter of 2016 GAAP and non-GAAP operating expenses decreased by $6.5 million and $3 million, respectively, versus our second quarter of 2015 as we realized the full benefit of our 2015 cost reduction program. We ended the second quarter of 2016 with approximately 1,050 employees, which was flat as compared to our first quarter of 2016 and our fiscal year end 2015.  Lastly, our balance sheet remained strong and we ended our second quarter of 2016 with cash and equivalents of $142.7 million.”

 

Stock Buyback Program

 

During the second quarter of 2016, the Company repurchased a total of 0.4 million shares at a weighted average price of $8.61 per share, for a total of $3.5 million.  Under the current stock buyback program, the Company is authorized to repurchase up to an additional $10 million of the Company’s common stock as of the end of its second quarter of 2016.

 

2016 Restructuring Program

 

The Company is announcing a restructuring program to further accelerate its investment in new technologies as the communications industry migrates to a Cloud-based architecture.  The Company expects to record between $3 million and $4 million of restructuring expense over the next twelve months in connection with this action,  resulting in expected annual savings of approximately $6 million to $8 million. The Company intends to utilize the entire savings to shift headcount towards new strategic initiatives (e.g., new products, expanded go-to-market footprint in selected geographies and discrete vertical markets). The Company plans to provide additional information regarding this program when it reports its third quarter of 2016 results.

 

Q316 and FY16 Guidance

 

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

 

 

 

Q316 Guidance

 

FY16 Guidance

Total Company Revenue

 

$63 million to $65 million

 

$257 million to $263 million

GAAP Gross Margin

 

65% to 65.6%

 

Not provided

Non-GAAP Gross Margin(1)

 

68% to 68.5%

 

Not provided

GAAP Operating Expenses

 

$44.6 million to $45.6 million

 

Not provided

Non-GAAP Operating Expenses(1)

 

$38.5 million to $39.5 million

 

Not provided

GAAP Loss per Share

 

($0.07) to ($0.06)

 

($0.22) to ($0.18)

Non-GAAP Diluted Earnings per Share(1)

 

$0.08 to $0.09

 

$0.35 to $0.39

Basic Shares

 

49.6 million

 

49.5 million

Diluted Shares

 

50 million

 

50 million

 


1)       Please see the reconciliation of Non-GAAP and GAAP financial measures in the press release appendix.

 

Conference call details:

Date:  July 27, 2016

Time:  8:30 a.m. (ET)

Dial-in number:  800-707-8454

International callers:  +1-303-223-4368

 



 

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.

 

An archived version of the broadcast will be available on the same website shortly after the conclusion of the live event.  A replay of the telephone conference call will be available following the conference call until August 10, 2016, and can be accessed by calling 800-633-8284 or +1-402-977-9140 for international callers.  The reservation number for the replay is 21813731.

 

Accounting Period

 

Beginning in fiscal 2016, the Company will report its first, second and third quarters on a month-end basis, such that the first quarter ended on March 31, 2016, the second quarter ended on June 30, 2016, and the third quarter will end on September 30, 2016.  The Company’s fiscal year will continue to end on December 31.

 

Tags

 

Sonus Networks, Sonus, SONS, 2016 second quarter, 2016 earnings, results, IP-based network solutions, SBC, DSC, SWe, SDN, software edition, software SBC, session border controller, session management, SIP trunking, Cloud VoIP communications, unified communications, UC, VoIP, IP, media gateway, GSX, NFV

 

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), policy/routing servers, network intelligence applications, media and signaling gateways and network analytics tools.  For more information, visit www.sonus.net or call 1-855-GO-SONUS.

 

Important Information Regarding Forward-Looking Statements

 

This press 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 made by our executive officers in the section “Second Quarter 2016 Highlights”, statements in the sections “2016 Restructuring Program” and “Q316 and FY16 Guidance” and statements regarding our future results of operations and financial position, business strategy, strategic position, plans and objectives of management for future operations and plans for future product development and manufacturing, 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; 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 restructuring and cost-containment 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; 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: stock-based compensation, amortization of intangible assets, depreciation expense for an abandoned facility, patent litigation settlement costs, acquisition-related expense, restructuring and certain gains and losses included in other income (expense).  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.

 

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.

 

In June 2016, we recorded $0.6 million of patent litigation settlement costs.  This amount is included as a component of General and administrative expense; however, we believe that such patent litigation settlement costs are not part of our core business or ongoing operations.  Accordingly, we believe that excluding this patent litigation settlement expense facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

 

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 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, as such incremental depreciation expense is not related to our ongoing operations or our core business activities.

 

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.  Additionally, as announced above, we expect to record restructuring expense in connection with a new restructuring initiative over the next twelve months.  We review our restructuring accruals regularly and record adjustments (both expense and credits) to these estimates as required.  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, as there are no future revenue streams or other benefits associated with these costs.

 

In July 2016, we sold the NET domain name to a third party and expect to recognize a gain, net of commission and fees, of $0.8 million, which we will record as a component of Other income, net, in the third quarter of 2016.  We believe that such gains are not part of our core business or ongoing operations.  Accordingly, we believe that excluding the other income arising from this sale facilitates the comparison of our financial 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

Wendy Tullo

(978) 614-8167

wtullo@sonusnet.com

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

 

 

 

Three months ended

 

 

 

June 30,

 

March 31,

 

June 26,

 

 

 

2016

 

2016

 

2015

 

Revenue:

 

 

 

 

 

 

 

Product

 

$

35,349

 

$

34,769

 

$

27,042

 

Service

 

25,508

 

24,382

 

27,659

 

Total revenue

 

60,857

 

59,151

 

54,701

 

 

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 

Product

 

11,409

 

11,536

 

11,269

 

Service

 

9,220

 

9,212

 

9,018

 

Total cost of revenue

 

20,629

 

20,748

 

20,287

 

 

 

 

 

 

 

 

 

Gross profit

 

40,228

 

38,403

 

34,414

 

 

 

 

 

 

 

 

 

Gross margin:

 

 

 

 

 

 

 

Product

 

67.7

%

66.8

%

58.3

%

Service

 

63.9

%

62.2

%

67.4

%

Total gross margin

 

66.1

%

64.9

%

62.9

%

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

17,457

 

17,318

 

19,968

 

Sales and marketing

 

16,192

 

16,595

 

17,540

 

General and administrative

 

9,287

 

8,371

 

10,444

 

Acquisition-related

 

 

 

24

 

Restructuring

 

 

 

1,487

 

Total operating expenses

 

42,936

 

42,284

 

49,463

 

 

 

 

 

 

 

 

 

Loss from operations

 

(2,708

)

(3,881

)

(15,049

)

Interest income (expense), net

 

217

 

164

 

(20

)

Other income, net

 

10

 

103

 

5

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(2,481

)

(3,614

)

(15,064

)

Income tax provision

 

(435

)

(1,040

)

(279

)

 

 

 

 

 

 

 

 

Net loss

 

$

(2,916

)

$

(4,654

)

$

(15,343

)

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

Basic

 

$

(0.06

)

$

(0.09

)

$

(0.31

)

Diluted

 

$

(0.06

)

$

(0.09

)

$

(0.31

)

 

 

 

 

 

 

 

 

Shares used to compute loss per share:

 

 

 

 

 

 

 

Basic

 

49,423

 

49,484

 

49,484

 

Diluted

 

49,423

 

49,484

 

49,484

 

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

 

 

 

Six months ended

 

 

 

June 30,

 

June 26,

 

 

 

2016

 

2015

 

Revenue:

 

 

 

 

 

Product

 

$

70,118

 

$

51,907

 

Service

 

49,890

 

52,939

 

Total revenue

 

120,008

 

104,846

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

Product

 

22,945

 

22,917

 

Service

 

18,432

 

18,285

 

Total cost of revenue

 

41,377

 

41,202

 

 

 

 

 

 

 

Gross profit

 

78,631

 

63,644

 

 

 

 

 

 

 

Gross margin:

 

 

 

 

 

Product

 

67.3

%

55.8

%

Service

 

63.1

%

65.5

%

Total gross margin

 

65.5

%

60.7

%

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Research and development

 

34,775

 

39,307

 

Sales and marketing

 

32,787

 

37,305

 

General and administrative

 

17,658

 

19,668

 

Acquisition-related

 

 

131

 

Restructuring

 

 

1,148

 

Total operating expenses

 

85,220

 

97,559

 

 

 

 

 

 

 

Loss from operations

 

(6,589

)

(33,915

)

Interest income, net

 

381

 

8

 

Other income, net

 

113

 

50

 

 

 

 

 

 

 

Loss before income taxes

 

(6,095

)

(33,857

)

Income tax provision

 

(1,475

)

(845

)

 

 

 

 

 

 

Net loss

 

$

(7,570

)

$

(34,702

)

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

Basic

 

$

(0.15

)

$

(0.70

)

Diluted

 

$

(0.15

)

$

(0.70

)

 

 

 

 

 

 

Shares used to compute loss per share:

 

 

 

 

 

Basic

 

49,453

 

49,454

 

Diluted

 

49,453

 

49,454

 

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2016

 

2015

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

36,261

 

$

50,111

 

Short-term investments

 

52,505

 

58,533

 

Accounts receivable, net

 

36,851

 

51,533

 

Inventory

 

20,674

 

23,111

 

Other current assets

 

13,763

 

11,853

 

Total current assets

 

160,054

 

195,141

 

 

 

 

 

 

 

Property and equipment, net

 

12,407

 

13,620

 

Intangible assets, net

 

22,368

 

26,087

 

Goodwill

 

40,310

 

40,310

 

Investments

 

53,942

 

33,605

 

Deferred income taxes

 

1,778

 

1,879

 

Other assets

 

5,207

 

2,249

 

 

 

$

296,066

 

$

312,891

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

4,330

 

$

5,949

 

Accrued expenses

 

20,949

 

31,963

 

Current portion of deferred revenue

 

38,148

 

38,716

 

Current portion of long-term liabilities

 

898

 

821

 

Total current liabilities

 

64,325

 

77,449

 

 

 

 

 

 

 

Deferred revenue

 

7,227

 

7,374

 

Deferred income taxes

 

2,631

 

2,282

 

Other long-term liabilities

 

1,829

 

2,760

 

Total liabilities

 

76,012

 

89,865

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders equity:

 

 

 

 

 

Common stock

 

49

 

49

 

Additional paid-in capital

 

1,244,694

 

1,240,803

 

Accumulated deficit

 

(1,030,812

)

(1,023,242

)

Accumulated other comprehensive income

 

6,123

 

5,416

 

Total stockholders’ equity

 

220,054

 

223,026

 

 

 

$

296,066

 

$

312,891

 

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six months ended

 

 

 

June 30,

 

June 26,

 

 

 

2016

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(7,570

)

$

(34,702

)

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

 

 

 

 

 

Depreciation and amortization of property and equipment

 

3,970

 

6,902

 

Amortization of intangible assets

 

3,719

 

3,238

 

Stock-based compensation

 

9,056

 

11,629

 

Loss on disposal of property and equipment

 

26

 

22

 

Deferred income taxes

 

587

 

335

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

14,955

 

14,223

 

Inventory

 

844

 

(3,590

)

Other operating assets

 

(2,566

)

(1,389

)

Accounts payable

 

(1,732

)

(1,994

)

Accrued expenses and other long-term liabilities

 

(11,182

)

(13,466

)

Deferred revenue

 

(888

)

4,524

 

Net cash provided by (used in) operating activities

 

9,219

 

(14,268

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(2,636

)

(4,524

)

Business acquisitions, net of cash acquired

 

(750

)

(10,147

)

Purchases of marketable securities

 

(59,138

)

(3,737

)

Sale/maturities of marketable securities

 

44,364

 

30,620

 

Net cash provided by (used in) investing activities

 

(18,160

)

12,212

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

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

 

632

 

1,668

 

Proceeds from exercise of stock options

 

15

 

1,739

 

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

 

(832

)

(2,164

)

Repurchase of common stock

 

(4,980

)

(6,084

)

Principal payments of capital lease obligations

 

(24

)

(41

)

Net cash used in financing activities

 

(5,189

)

(4,882

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

280

 

(91

)

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(13,850

)

(7,029

)

Cash and cash equivalents, beginning of year

 

50,111

 

41,157

 

Cash and cash equivalents, end of period

 

$

36,261

 

$

34,128

 

 



 

SONUS NETWORKS, INC.

Supplemental Information

(In thousands)

(unaudited)

 

 

The following tables provide the details of stock-based compensation, amortization of intangible assets, depreciation expense related to an abandoned facility and patent litigation settlement expense included in the Company’s Condensed Consolidated Statements of Operations and the line items in which these amounts are reported.

 

 

 

Three months ended

 

 

 

June 30,

 

March 31,

 

June 26,

 

 

 

2016

 

2016

 

2015

 

Stock-based compensation

 

 

 

 

 

 

 

Cost of revenue - product

 

$

93

 

$

71

 

$

83

 

Cost of revenue - service

 

322

 

332

 

397

 

Cost of revenue

 

415

 

403

 

480

 

 

 

 

 

 

 

 

 

Research and development expense

 

1,210

 

1,179

 

1,445

 

Sales and marketing expense

 

1,224

 

1,020

 

1,852

 

General and administrative expense

 

1,792

 

1,813

 

3,032

 

Operating expense

 

4,226

 

4,012

 

6,329

 

 

 

 

 

 

 

 

 

Total stock-based compensation

 

$

4,641

 

$

4,415

 

$

6,809

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

 

 

 

Cost of revenue - product

 

$

1,455

 

$

1,627

 

$

1,176

 

 

 

 

 

 

 

 

 

Sales and marketing expense

 

318

 

319

 

415

 

Operating expense

 

318

 

319

 

415

 

 

 

 

 

 

 

 

 

Total amortization of intangible assets

 

$

1,773

 

$

1,946

 

$

1,591

 

 

 

 

 

 

 

 

 

Depreciation expense for abandoned facility

 

 

 

 

 

 

 

Research and development expense

 

$

 

$

 

$

324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patent litigation settlement

 

 

 

 

 

 

 

General and administrative expense

 

$

605

 

$

 

$

 

 



 

SONUS NETWORKS, INC.

Supplemental Information

(In thousands)

(unaudited)

 

The following tables provide the details of stock-based compensation, amortization of intangible assets, depreciation expense related to an abandoned facility and patent litigation settlement expense included in the Company’s Condensed Consolidated Statements of Operations and the line items in which these amounts are reported.

 

 

 

Six months ended

 

 

 

June 30,

 

June 26,

 

 

 

2016

 

2015

 

Stock-based compensation

 

 

 

 

 

Cost of revenue - product

 

$

164

 

$

157

 

Cost of revenue - service

 

654

 

777

 

Cost of revenue

 

818

 

934

 

 

 

 

 

 

 

Research and development expense

 

2,389

 

2,803

 

Sales and marketing expense

 

2,244

 

2,868

 

General and administrative expense

 

3,605

 

5,024

 

Operating expense

 

8,238

 

10,695

 

 

 

 

 

 

 

Total stock-based compensation

 

$

9,056

 

$

11,629

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

 

Cost of revenue - product

 

$

3,082

 

$

2,344

 

 

 

 

 

 

 

Sales and marketing expense

 

637

 

894

 

Operating expense

 

637

 

894

 

 

 

 

 

 

 

Total amortization of intangible assets

 

$

3,719

 

$

3,238

 

 

 

 

 

 

 

Depreciation expense for abandoned facility

 

 

 

 

 

Research and development expense

 

$

 

$

324

 

 

 

 

 

 

 

Patent litigation settlement expense

 

 

 

 

 

General and administrative expense

 

$

605

 

$

 

 



 

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 30,

 

March 31,

 

June 26,

 

 

 

2016

 

2016

 

2015

 

 

 

 

 

 

 

 

 

GAAP gross margin - product

 

67.7

%

66.8

%

58.3

%

Stock-based compensation expense

 

0.3

%

0.2

%

0.3

%

Amortization of intangible assets

 

4.1

%

4.7

%

4.4

%

Non-GAAP gross margin - product

 

72.1

%

71.7

%

63.0

%

 

 

 

 

 

 

 

 

GAAP gross margin - service

 

63.9

%

62.2

%

67.4

%

Stock-based compensation expense

 

1.2

%

1.4

%

1.4

%

Non-GAAP gross margin - service

 

65.1

%

63.6

%

68.8

%

 

 

 

 

 

 

 

 

GAAP total gross margin

 

66.1

%

64.9

%

62.9

%

Stock-based compensation expense

 

0.7

%

0.7

%

0.9

%

Amortization of intangible assets

 

2.4

%

2.8

%

2.1

%

Non-GAAP total gross margin

 

69.2

%

68.4

%

65.9

%

 

 

 

 

 

 

 

 

GAAP total gross profit

 

$

40,228

 

$

38,403

 

$

34,414

 

Stock-based compensation expense

 

415

 

403

 

480

 

Amortization of intangible assets

 

1,455

 

1,627

 

1,176

 

Non-GAAP total gross profit

 

$

42,098

 

$

40,433

 

$

36,070

 

 

 

 

 

 

 

 

 

GAAP research and development expense

 

$

17,457

 

$

17,318

 

$

19,968

 

Stock-based compensation expense

 

(1,210

)

(1,179

)

(1,445

)

Depreciation expense for abandoned facility

 

 

 

(324

)

Non-GAAP research and development expense

 

$

16,247

 

$

16,139

 

$

18,199

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

 

$

16,192

 

$

16,595

 

$

17,540

 

Stock-based compensation expense

 

(1,224

)

(1,020

)

(1,852

)

Amortization of intangible assets

 

(318

)

(319

)

(415

)

Non-GAAP sales and marketing expense

 

$

14,650

 

$

15,256

 

$

15,273

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

 

$

9,287

 

$

8,371

 

$

10,444

 

Stock-based compensation expense

 

(1,792

)

(1,813

)

(3,032

)

Patent litigation settlement expense

 

(605

)

 

 

Non-GAAP general and administrative expense

 

$

6,890

 

$

6,558

 

$

7,412

 

 

 

 

 

 

 

 

 

GAAP operating expenses

 

$

42,936

 

$

42,284

 

$

49,463

 

Stock-based compensation expense

 

(4,226

)

(4,012

)

(6,329

)

Amortization of intangible assets

 

(318

)

(319

)

(415

)

Patent litigation settlement expense

 

(605

)

 

 

Depreciation expense for abandoned facility

 

 

 

(324

)

Acquisition-related expense

 

 

 

(24

)

Restructuring

 

 

 

(1,487

)

Non-GAAP operating expenses

 

$

37,787

 

$

37,953

 

$

40,884

 

 

 

 

 

 

 

 

 

GAAP loss from operations

 

$

(2,708

)

$

(3,881

)

$

(15,049

)

Stock-based compensation expense

 

4,641

 

4,415

 

6,809

 

Amortization of intangible assets

 

1,773

 

1,946

 

1,591

 

Patent litigation settlement expense

 

605

 

 

 

Depreciation expense for abandoned facility

 

 

 

324

 

Acquisition-related expense

 

 

 

24

 

Restructuring

 

 

 

1,487

 

Non-GAAP income (loss) from operations

 

$

4,311

 

$

2,480

 

$

(4,814

)

 

 

 

 

 

 

 

 

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

 

-4.4

%

-6.6

%

-27.5

%

Stock-based compensation expense

 

7.6

%

7.5

%

12.5

%

Amortization of intangible assets

 

2.9

%

3.3

%

2.9

%

Patent litigation settlement expense

 

1.0

%

0.0

%

0.0

%

Depreciation expense for abandoned facility

 

0.0

%

0.0

%

0.6

%

Acquisition-related expense

 

0.0

%

0.0

%

*

 

Restructuring

 

0.0

%

0.0

%

2.7

%

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

 

7.1

%

4.2

%

-8.8

%

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(2,916

)

$

(4,654

)

$

(15,343

)

Stock-based compensation expense

 

4,641

 

4,415

 

6,809

 

Amortization of intangible assets

 

1,773

 

1,946

 

1,591

 

Depreciation expense for abandoned facility

 

 

 

324

 

Patent litigation settlement expense

 

605

 

 

 

Acquisition-related expense

 

 

 

24

 

Restructuring

 

 

 

1,487

 

Non-GAAP net income (loss)

 

$

4,103

 

$

1,707

 

$

(5,108

)

 

 

 

 

 

 

 

 

Diluted earnings per share or (loss) per share

 

 

 

 

 

 

 

GAAP loss per share

 

$

(0.06

)

$

(0.09

)

$

(0.31

)

Stock-based compensation expense

 

0.09

 

0.08

 

0.14

 

Amortization of intangible assets

 

0.04

 

0.04

 

0.03

 

Depreciation expense for abandoned facility

 

 

 

0.01

 

Patent litigation settlement expense

 

0.01

 

 

 

Acquisition-related expense

 

 

 

**

 

Restructuring

 

 

 

0.03

 

Gain on sale of domain name

 

 

 

 

Non-GAAP diluted earnings (loss) per share

 

$

0.08

 

$

0.03

 

$

(0.10

)

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

GAAP shares used to compute loss per share

 

49,423

 

49,484

 

49,484

 

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

 

49,970

 

49,685

 

49,484

 

 


*    Less than 0.1% of revenue

**  Less than $0.01 impact on loss per share

 



 

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 30,

 

June 26,

 

 

 

2016

 

2015

 

 

 

 

 

 

 

GAAP gross margin - product

 

67.3

%

55.8

%

Stock-based compensation expense

 

0.2

%

0.3

%

Amortization of intangible assets

 

4.4

%

4.6

%

Non-GAAP gross margin - product

 

71.9

%

60.7

%

 

 

 

 

 

 

GAAP gross margin - service

 

63.1

%

65.5

%

Stock-based compensation expense

 

1.3

%

1.4

%

Non-GAAP gross margin - service

 

64.4

%

66.9

%

 

 

 

 

 

 

GAAP total gross margin

 

65.5

%

60.7

%

Stock-based compensation expense

 

0.7

%

0.9

%

Amortization of intangible assets

 

2.6

%

2.2

%

Non-GAAP total gross margin

 

68.8

%

63.8

%

 

 

 

 

 

 

GAAP total gross profit

 

$

78,631

 

$

63,644

 

Stock-based compensation expense

 

818

 

934

 

Amortization of intangible assets

 

3,082

 

2,344

 

Non-GAAP total gross profit

 

$

82,531

 

$

66,922

 

 

 

 

 

 

 

GAAP research and development expense

 

$

34,775

 

$

39,307

 

Stock-based compensation expense

 

(2,389

)

(2,803

)

Depreciation expense for abandoned facility

 

 

(324

)

Non-GAAP research and development expense

 

$

32,386

 

$

36,180

 

 

 

 

 

 

 

GAAP sales and marketing expense

 

$

32,787

 

$

37,305

 

Stock-based compensation expense

 

(2,244

)

(2,868

)

Amortization of intangible assets

 

(637

)

(894

)

Non-GAAP sales and marketing expense

 

$

29,906

 

$

33,543

 

 

 

 

 

 

 

GAAP general and administrative expense

 

$

17,658

 

$

19,668

 

Stock-based compensation expense

 

(3,605

)

(5,024

)

Patent litigation settlement expense

 

(605

)

 

Non-GAAP general and administrative expense

 

$

13,448

 

$

14,644

 

 

 

 

 

 

 

GAAP operating expenses

 

$

85,220

 

$

97,559

 

Stock-based compensation expense

 

(8,238

)

(10,695

)

Amortization of intangible assets

 

(637

)

(894

)

Depreciation expense for abandoned facility

 

 

(324

)

Patent litigation settlement expense

 

(605

)

 

Acquisition-related expense

 

 

(131

)

Restructuring

 

 

(1,148

)

Non-GAAP operating expenses

 

$

75,740

 

$

84,367

 

 

 

 

 

 

 

GAAP income (loss) from operations

 

$

(6,589

)

$

(33,915

)

Stock-based compensation expense

 

9,056

 

11,629

 

Amortization of intangible assets

 

3,719

 

3,238

 

Depreciation expense for abandoned facility

 

 

324

 

Patent litigation settlement expense

 

605

 

 

Acquisition-related expense

 

 

131

 

Restructuring

 

 

1,148

 

Non-GAAP income (loss) from operations

 

$

6,791

 

$

(17,445

)

 

 

 

 

 

 

GAAP loss from operations as a percentage of revenue

 

-5.5

%

-32.3

%

Stock-based compensation expense

 

7.6

%

11.1

%

Amortization of intangible assets

 

3.1

%

3.1

%

Depreciation expense for abandoned facility

 

0.0

%

0.3

%

Patent litigation settlement expense

 

0.5

%

0.0

%

Acquisition-related expense

 

0.0

%

0.1

%

Restructuring

 

0.0

%

1.1

%

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

 

5.7

%

-16.6

%

 

 

 

 

 

 

GAAP net loss

 

$

(7,570

)

$

(34,702

)

Stock-based compensation expense

 

9,056

 

11,629

 

Amortization of intangible assets

 

3,719

 

3,238

 

Depreciation expense for abandoned facility

 

 

324

 

Patent litigation settlement expense

 

605

 

 

Acquisition-related expense

 

 

131

 

Restructuring

 

 

1,148

 

Non-GAAP net income (loss)

 

$

5,810

 

$

(18,232

)

 

 

 

 

 

 

Diluted earnings per share or (loss) per share

 

 

 

 

 

GAAP loss per share

 

$

(0.15

)

$

(0.70

)

Stock-based compensation expense

 

0.19

 

0.23

 

Amortization of intangible assets

 

0.07

 

0.07

 

Depreciation expense for abandoned facility

 

 

0.01

 

Patent litigation settlement expense

 

0.01

 

 

Acquisition-related expense

 

 

**

 

Restructuring

 

 

0.02

 

Non-GAAP diluted earnings (loss) per share

 

$

0.12

 

$

(0.37

)

 

 

 

 

 

 

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

 

 

 

 

 

GAAP shares used to compute loss per share

 

49,453

 

49,454

 

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

 

49,780

 

49,454

 

 


** Less than $0.01 impact on loss per share

 



 

SONUS NETWORKS, INC.

 Reconciliation of Non-GAAP and GAAP Financial Measures - Guidance

 (in millions, except percentages and per share amounts)

 (unaudited)

 

 

 

Three months ending

 

 

 

September 30, 2016

 

 

 

Range

 

 

 

 

 

 

 

Revenue

 

$

63

 

$

65

 

 

 

 

 

 

 

Gross margin

 

 

 

 

 

GAAP outlook

 

65.0

%

65.6

%

Stock-based compensation expense

 

0.6

%

0.6

%

Amortization of intangible assets

 

2.4

%

2.3

%

Non-GAAP guidance

 

68.0

%

68.5

%

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

GAAP outlook

 

$

44.6

 

$

45.6

 

Stock-based compensation expense

 

(4.3

)

(4.3

)

Amortization of intangible assets

 

(0.3

)

(0.3

)

Restructuring

 

(1.5

)

(1.5

)

Non-GAAP guidance

 

$

38.5

 

$

39.5

 

 

 

 

 

 

 

Income (loss) per share

 

 

 

 

 

GAAP outlook

 

$

(0.07

)

$

(0.06

)

Stock-based compensation expense

 

0.10

 

0.10

 

Amortization of intangible assets

 

0.04

 

0.04

 

Restructuring

 

0.03

 

0.03

 

Gain on sale of domain name

 

(0.02

)

(0.02

)

Non-GAAP guidance

 

$

0.08

 

$

0.09

 

 

 

 

Year ending December 31, 2016

 

 

 

Range

 

 

 

 

 

 

 

Revenue

 

$

257

 

$

263

 

 

 

 

 

 

 

Income (loss) per share

 

 

 

 

 

GAAP outlook

 

$

(0.22

)

$

(0.18

)

Stock-based compensation expense

 

0.37

 

0.37

 

Amortization of intangible assets

 

0.15

 

0.15

 

Patent litigation settlement expense

 

0.01

 

0.01

 

Restructuring

 

0.06

 

0.06

 

Gain on sale of domain name

 

(0.02

)

(0.02

)

Non-GAAP guidance

 

$

0.35

 

$

0.39