x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 2017 | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE | 04-3387074 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer o | Accelerated filer x | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o | |||
Emerging growth company o |
Item | Page | |
PART I FINANCIAL INFORMATION | ||
PART II OTHER INFORMATION | ||
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 51,280 | $ | 31,923 | |||
Marketable securities | 53,272 | 61,836 | |||||
Accounts receivable, net of allowance for doubtful accounts of $317 at September 30, 2017 and $10 at December 31, 2016 | 51,637 | 53,862 | |||||
Inventory | 16,282 | 18,283 | |||||
Other current assets | 14,314 | 12,010 | |||||
Total current assets | 186,785 | 177,914 | |||||
Property and equipment, net | 9,742 | 11,741 | |||||
Intangible assets, net | 23,352 | 30,197 | |||||
Goodwill | 49,891 | 49,393 | |||||
Investments | 27,018 | 32,371 | |||||
Deferred income taxes | 1,570 | 1,542 | |||||
Other assets | 4,086 | 4,901 | |||||
$ | 302,444 | $ | 308,059 | ||||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 6,947 | $ | 6,525 | |||
Accrued expenses | 23,771 | 25,886 | |||||
Current portion of deferred revenue | 48,182 | 43,504 | |||||
Current portion of long-term liabilities | 707 | 1,154 | |||||
Total current liabilities | 79,607 | 77,069 | |||||
Deferred revenue | 6,777 | 7,188 | |||||
Deferred income taxes | 3,687 | 3,047 | |||||
Other long-term liabilities | 1,791 | 1,633 | |||||
Total liabilities | 91,862 | 88,937 | |||||
Commitments and contingencies (Note 15) | |||||||
Stockholders' equity: | |||||||
Preferred stock, $0.01 par value per share; 5,000,000 shares authorized, none issued and outstanding | — | — | |||||
Common stock, $0.001 par value per share; 120,000,000 shares authorized; 49,945,286 shares issued and outstanding at September 30, 2017; 49,041,881 shares issued and outstanding at December 31, 2016 | 50 | 49 | |||||
Additional paid-in capital | 1,261,627 | 1,250,744 | |||||
Accumulated deficit | (1,056,712 | ) | (1,037,174 | ) | |||
Accumulated other comprehensive income | 5,617 | 5,503 | |||||
Total stockholders' equity | 210,582 | 219,122 | |||||
$ | 302,444 | $ | 308,059 |
Three months ended | Nine months ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Revenue: | |||||||||||||||
Product | $ | 44,120 | $ | 38,601 | $ | 98,305 | $ | 108,719 | |||||||
Service | 30,509 | 26,410 | 85,425 | 76,300 | |||||||||||
Total revenue | 74,629 | 65,011 | 183,730 | 185,019 | |||||||||||
Cost of revenue: | |||||||||||||||
Product | 9,708 | 12,285 | 28,748 | 35,230 | |||||||||||
Service | 10,374 | 9,140 | 30,285 | 27,572 | |||||||||||
Total cost of revenue | 20,082 | 21,425 | 59,033 | 62,802 | |||||||||||
Gross profit | 54,547 | 43,586 | 124,697 | 122,217 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 20,798 | 18,230 | 61,071 | 53,005 | |||||||||||
Sales and marketing | 17,454 | 18,103 | 47,850 | 50,890 | |||||||||||
General and administrative | 10,833 | 8,998 | 27,993 | 26,656 | |||||||||||
Acquisition-related | 1,543 | 951 | 6,278 | 951 | |||||||||||
Restructuring | — | 1,620 | 1,071 | 1,620 | |||||||||||
Total operating expenses | 50,628 | 47,902 | 144,263 | 133,122 | |||||||||||
Income (loss) from operations | 3,919 | (4,316 | ) | (19,566 | ) | (10,905 | ) | ||||||||
Interest income, net | 260 | 209 | 772 | 590 | |||||||||||
Other income, net | 1 | 803 | 577 | 916 | |||||||||||
Income (loss) before income taxes | 4,180 | (3,304 | ) | (18,217 | ) | (9,399 | ) | ||||||||
Income tax provision | (727 | ) | (427 | ) | (1,321 | ) | (1,902 | ) | |||||||
Net income (loss) | $ | 3,453 | $ | (3,731 | ) | $ | (19,538 | ) | $ | (11,301 | ) | ||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | 0.07 | $ | (0.08 | ) | $ | (0.39 | ) | $ | (0.23 | ) | ||||
Diluted | $ | 0.07 | $ | (0.08 | ) | $ | (0.39 | ) | $ | (0.23 | ) | ||||
Shares used to compute earnings (loss) per share: | |||||||||||||||
Basic | 49,753 | 49,402 | 49,472 | 49,436 | |||||||||||
Diluted | 50,131 | 49,402 | 49,472 | 49,436 |
Three months ended | Nine months ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Net income (loss) | $ | 3,453 | $ | (3,731 | ) | $ | (19,538 | ) | $ | (11,301 | ) | ||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Foreign currency translation adjustments | (13 | ) | 49 | 102 | 484 | ||||||||||
Unrealized gain (loss) on available-for sale marketable securities, net of tax | 43 | (112 | ) | 12 | 160 | ||||||||||
Reclassification adjustment for realized losses included in net loss | — | — | — | 18 | |||||||||||
Other comprehensive income (loss), net of tax | 30 | (63 | ) | 114 | 662 | ||||||||||
Comprehensive income (loss), net of tax | $ | 3,483 | $ | (3,794 | ) | $ | (19,424 | ) | $ | (10,639 | ) |
Nine months ended | |||||||
September 30, 2017 | September 30, 2016 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (19,538 | ) | $ | (11,301 | ) | |
Adjustments to reconcile net loss to cash flows provided by operating activities: | |||||||
Depreciation and amortization of property and equipment | 5,255 | 5,914 | |||||
Amortization of intangible assets | 6,845 | 5,493 | |||||
Stock-based compensation | 11,387 | 15,464 | |||||
Loss on disposal of property and equipment | 10 | 29 | |||||
Gain on sale of IP addresses | (576 | ) | (800 | ) | |||
Deferred income taxes | 687 | 763 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 2,360 | 9,287 | |||||
Inventory | 1,806 | 2,756 | |||||
Other operating assets | (545 | ) | (798 | ) | |||
Accounts payable | 384 | (2,904 | ) | ||||
Accrued expenses and other long-term liabilities | (3,028 | ) | (12,032 | ) | |||
Deferred revenue | 4,000 | (1,823 | ) | ||||
Net cash provided by operating activities | 9,047 | 10,048 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (3,265 | ) | (3,637 | ) | |||
Business acquisition, net of cash acquired | — | (20,669 | ) | ||||
Purchases of marketable securities | (28,731 | ) | (62,468 | ) | |||
Maturities/sales of marketable securities | 41,964 | 65,327 | |||||
Proceeds from the sale of IP addresses | 576 | 800 | |||||
Net cash provided by (used in) investing activities | 10,544 | (20,647 | ) | ||||
Cash flows from financing activities: | |||||||
Proceeds from sale of common stock in connection with employee stock purchase plan | 1,252 | 1,360 | |||||
Proceeds from exercise of stock options | 149 | 135 | |||||
Payment of tax withholding obligations related to net share settlements of restricted stock awards | (1,904 | ) | (1,538 | ) | |||
Repurchase of common stock | — | (7,130 | ) | ||||
Principal payments of capital lease obligations | (30 | ) | (33 | ) | |||
Net cash used in financing activities | (533 | ) | (7,206 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 299 | 260 | |||||
Net increase (decrease) in cash and cash equivalents | 19,357 | (17,545 | ) | ||||
Cash and cash equivalents, beginning of year | 31,923 | 50,111 | |||||
Cash and cash equivalents, end of period | $ | 51,280 | $ | 32,566 | |||
Supplemental disclosure of cash flow information: | |||||||
Interest paid | $ | 84 | $ | 27 | |||
Income taxes paid | $ | 1,198 | $ | 1,024 | |||
Income tax refunds received | $ | 91 | $ | 275 | |||
Supplemental disclosure of non-cash investing activities: | |||||||
Capital expenditures incurred, but not yet paid | $ | 301 | $ | 444 | |||
Property and equipment acquired under capital lease | $ | — | $ | 36 | |||
Fair value of contingent consideration related to acquisition | $ | — | $ | 10,000 |
Fair value of consideration transferred: | |||
Cash, net of cash acquired | $ | 19,919 | |
Fair value of assets acquired and liabilities assumed: | |||
Current assets | $ | 3,347 | |
Property and equipment | 1,478 | ||
Intangible assets: | |||
Developed technology | 2,100 | ||
Customer relationships | 9,510 | ||
Goodwill | 9,581 | ||
Other noncurrent assets | 23 | ||
Current liabilities | (5,435 | ) | |
Long-term liabilities | (685 | ) | |
$ | 19,919 |
Three months ended | Nine months ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Professional and services fees | $ | 1,543 | $ | 951 | $ | 6,278 | $ | 951 |
Three months ended | Nine months ended | ||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||
Weighted average shares outstanding—basic | 49,753 | 49,402 | 49,472 | 49,436 | |||||||
Potential dilutive common shares | 378 | — | — | — | |||||||
Weighted average shares outstanding—diluted | 50,131 | 49,402 | 49,472 | 49,436 |
September 30, 2017 | |||||||||||||||
Amortized cost | Unrealized gains | Unrealized losses | Fair value | ||||||||||||
Cash equivalents | $ | 21,114 | $ | — | $ | — | $ | 21,114 | |||||||
Marketable securities | |||||||||||||||
Municipal obligations | $ | 1,085 | $ | — | $ | — | $ | 1,085 | |||||||
U.S. government agency notes | 26,395 | — | (43 | ) | 26,352 | ||||||||||
Corporate debt securities | 23,163 | — | (28 | ) | 23,135 | ||||||||||
Certificates of deposit | 2,700 | — | — | 2,700 | |||||||||||
$ | 53,343 | $ | — | $ | (71 | ) | $ | 53,272 | |||||||
Investments | |||||||||||||||
U.S. government agency notes | $ | 11,036 | $ | — | $ | (23 | ) | $ | 11,013 | ||||||
Corporate debt securities | 12,157 | 2 | (20 | ) | 12,139 | ||||||||||
Certificates of deposit | 3,866 | — | — | 3,866 | |||||||||||
$ | 27,059 | $ | 2 | $ | (43 | ) | $ | 27,018 |
December 31, 2016 | |||||||||||||||
Amortized cost | Unrealized gains | Unrealized losses | Fair value | ||||||||||||
Cash equivalents | $ | 6,619 | $ | — | $ | — | $ | 6,619 | |||||||
Marketable securities | |||||||||||||||
Municipal obligations | $ | 3,264 | $ | — | $ | (3 | ) | $ | 3,261 | ||||||
U.S. government agency notes | 16,477 | 3 | (3 | ) | 16,477 | ||||||||||
Corporate debt securities | 41,893 | 4 | (45 | ) | 41,852 | ||||||||||
Certificates of deposit | 246 | — | — | 246 | |||||||||||
$ | 61,880 | $ | 7 | $ | (51 | ) | $ | 61,836 | |||||||
Investments | |||||||||||||||
U.S. government agency notes | $ | 19,473 | $ | 3 | $ | (39 | ) | $ | 19,437 | ||||||
Corporate debt securities | 10,520 | — | (44 | ) | 10,476 | ||||||||||
Certificates of deposit | 2,458 | — | — | 2,458 | |||||||||||
$ | 32,451 | $ | 3 | $ | (83 | ) | $ | 32,371 |
Fair value measurements at September 30, 2017 using: | |||||||||||||||
Total carrying value at September 30, 2017 | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||
Cash equivalents | $ | 21,114 | $ | 21,114 | $ | — | $ | — | |||||||
Marketable securities | |||||||||||||||
Municipal obligations | $ | 1,085 | $ | — | $ | 1,085 | $ | — | |||||||
U.S. government agency notes | 26,352 | — | 26,352 | — | |||||||||||
Corporate debt securities | 23,135 | — | 23,135 | — | |||||||||||
Certificates of deposit | 2,700 | — | 2,700 | — | |||||||||||
$ | 53,272 | $ | — | $ | 53,272 | $ | — | ||||||||
Investments | |||||||||||||||
U.S. government agency notes | $ | 11,013 | $ | — | $ | 11,013 | $ | — | |||||||
Corporate debt securities | 12,139 | — | 12,139 | — | |||||||||||
Certificates of deposit | 3,866 | — | 3,866 | — | |||||||||||
$ | 27,018 | $ | — | $ | 27,018 | $ | — |
Fair value measurements at December 31, 2016 using: | |||||||||||||||
Total carrying value at December 31, 2016 | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||
Cash equivalents | $ | 6,619 | $ | 6,619 | $ | — | $ | — | |||||||
Marketable securities | |||||||||||||||
Municipal obligations | $ | 3,261 | $ | — | $ | 3,261 | $ | — | |||||||
U.S. government agency notes | 16,477 | — | 16,477 | — | |||||||||||
Corporate debt securities | 41,852 | — | 41,852 | — | |||||||||||
Certificates of deposit | 246 | — | 246 | — | |||||||||||
$ | 61,836 | $ | — | $ | 61,836 | $ | — | ||||||||
Investments | |||||||||||||||
U.S. government agency notes | $ | 19,437 | $ | — | $ | 19,437 | $ | — | |||||||
Corporate debt securities | 10,476 | — | 10,476 | — | |||||||||||
Certificates of deposit | 2,458 | — | 2,458 | — | |||||||||||
$ | 32,371 | $ | — | $ | 32,371 | $ | — |
September 30, 2017 | December 31, 2016 | ||||||
On-hand final assemblies and finished goods inventories | $ | 14,465 | $ | 15,346 | |||
Deferred cost of goods sold | 3,317 | 4,237 | |||||
17,782 | 19,583 | ||||||
Less current portion | (16,282 | ) | (18,283 | ) | |||
Noncurrent portion (included in Other assets) | $ | 1,500 | $ | 1,300 |
September 30, 2017 | Weighted average amortization period (years) | Cost | Accumulated amortization | Net carrying value | |||||||||
Developed technology | 6.54 | $ | 34,980 | $ | 21,222 | $ | 13,758 | ||||||
Customer relationships | 5.78 | 19,540 | 9,946 | 9,594 | |||||||||
Internal use software | 3.00 | 730 | 730 | — | |||||||||
6.23 | $ | 55,250 | $ | 31,898 | $ | 23,352 |
December 31, 2016 | Weighted average amortization period (years) | Cost | Accumulated amortization | Net carrying value | |||||||||
Developed technology | 6.54 | $ | 34,980 | $ | 16,453 | $ | 18,527 | ||||||
Customer relationships | 5.78 | 19,540 | 7,870 | 11,670 | |||||||||
Internal use software | 3.00 | 730 | 730 | — | |||||||||
6.23 | $ | 55,250 | $ | 25,053 | $ | 30,197 |
Three months ended | Nine months ended | Statement of operations classification | |||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||||
Developed technology | $ | 1,602 | $ | 1,455 | $ | 4,769 | $ | 4,537 | Cost of revenue - product | ||||||||
Customer relationships | 691 | 319 | 2,076 | 956 | Sales and marketing | ||||||||||||
$ | 2,293 | $ | 1,774 | $ | 6,845 | $ | 5,493 |
Years ending December 31, | |||
Remainder of 2017 | $ | 2,293 | |
2018 | 6,615 | ||
2019 | 5,608 | ||
2020 | 4,166 | ||
2021 | 2,395 | ||
Thereafter | 2,275 | ||
$ | 23,352 |
Balance at January 1, 2017 | |||
Goodwill | $ | 52,499 | |
Accumulated impairment losses | (3,106 | ) | |
49,393 | |||
Purchase accounting adjustments - Taqua | 498 | ||
Balance at September 30, 2017 | $ | 49,891 | |
Balance at September 30, 2017 | |||
Goodwill | $ | 52,997 | |
Accumulated impairment losses | (3,106 | ) | |
$ | 49,891 |
Balance at January 1, 2016 | |||
Goodwill | $ | 43,416 | |
Accumulated impairment losses | (3,106 | ) | |
40,310 | |||
Acquisition of Taqua | 11,826 | ||
Balance at September 30, 2016 | $ | 52,136 | |
Balance at September 30, 2016 | |||
Goodwill | $ | 55,242 | |
Accumulated impairment losses | (3,106 | ) | |
$ | 52,136 |
September 30, 2017 | December 31, 2016 | ||||||
Employee compensation and related costs | $ | 14,941 | $ | 15,879 | |||
Other | 8,830 | 10,007 | |||||
$ | 23,771 | $ | 25,886 |
Balance at January 1, 2017 | Initiatives charged to expense | Adjustments for changes in estimate | Cash payments | Balance at September 30, 2017 | |||||||||||||||
Severance | $ | 497 | $ | 405 | $ | (26 | ) | $ | (876 | ) | $ | — | |||||||
Facilities | — | 126 | — | (22 | ) | 104 | |||||||||||||
$ | 497 | $ | 531 | $ | (26 | ) | $ | (898 | ) | $ | 104 |
Balance at January 1, 2017 | Initiatives charged to expense | Adjustments for changes in estimate | Cash payments | Balance at September 30, 2017 | |||||||||||||||
Severance | $ | 384 | $ | 245 | $ | (49 | ) | $ | (580 | ) | $ | — | |||||||
Facilities | 218 | 370 | — | (275 | ) | 313 | |||||||||||||
$ | 602 | $ | 615 | $ | (49 | ) | $ | (855 | ) | $ | 313 |
Balance at January 1, 2017 | Initiatives charged to expense | Adjustments for changes in estimate | Cash payments | Balance at September 30, 2017 | |||||||||||||||
Severance | $ | 168 | $ | — | $ | — | $ | (168 | ) | $ | — |
• | Increase the aggregate number of shares of the Company's common stock authorized for issuance under the Plan by an additional 900,000 shares; |
• | Make the Plan more explicit by providing that any dividends on unvested restricted stock or with respect to shares of common stock granted under restricted stock units and other stock unit awards will be paid to a participant only if and when such shares become free from the restrictions on transferability and forfeitability that apply to such shares and that any dividend equivalents with respect to restricted stock units and other stock unit awards will be subject to the same vesting conditions and restrictions on transfer and forfeitability applicable to the underlying award with respect to which it is paid. No interest will be paid on any such equivalents or dividend equivalents; |
• | Explicitly require a participant who accepts an award under the Plan to be bound by any clawback policy that the Company has in effect or may adopt in the future; and |
• | Eliminate the requirement that each share of stock subject to an award of restricted stock, restricted stock units, performance awards or other stock unit awards (collectively, "full value awards") be counted against the share reserve as 1.50 shares for every one share subject to such award. This change applies to all full value awards from and after June 9, 2017, the date of the Annual Meeting. Shares of common stock subject to awards that were granted under any prior ratio that applied at the time such awards were granted will continue to return to the Plan upon forfeiture of such awards at the previous applicable ratio. |
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | |||||||||
Outstanding at January 1, 2017 | 5,610,106 | $ | 15.73 | |||||||||
Granted | 6,480 | $ | 6.53 | |||||||||
Exercised | (31,643 | ) | $ | 4.70 | ||||||||
Forfeited | (35,107 | ) | $ | 13.79 | ||||||||
Expired | (397,690 | ) | $ | 23.57 | ||||||||
Outstanding at September 30, 2017 | 5,152,146 | $ | 15.19 | 4.81 | $ | 177 | ||||||
Vested or expected to vest at September 30, 2017 | 5,130,390 | $ | 15.21 | 4.79 | $ | 172 | ||||||
Exercisable at September 30, 2017 | 4,824,340 | $ | 15.25 | 4.63 | $ | 141 |
Three months ended | Nine months ended | ||
September 30, 2017 | September 30, 2017 | ||
Risk-free interest rate | 1.81% | 1.81% - 1.95% | |
Expected dividends | — | — | |
Weighted average volatility | 50.7% | 51.2% | |
Expected life (years) | 5.0 | 5.0 |
Three months ended | Nine months ended | ||||||
September 30, 2017 | September 30, 2017 | ||||||
Weighted average grant date fair value of stock options granted | $ | 3.11 | $ | 3.00 | |||
Total intrinsic value of stock options exercised (in thousands) | $ | 17 | $ | 80 | |||
Cash received from the exercise of stock options (in thousands) | $ | 59 | $ | 149 |
Shares | Weighted Average Grant Date Fair Value | |||||
Unvested balance at January 1, 2017 | 2,030,028 | $ | 9.69 | |||
Granted | 735,912 | $ | 6.86 | |||
Vested | (820,632 | ) | $ | 10.37 | ||
Forfeited | (25,426 | ) | $ | 13.02 | ||
Unvested balance at September 30, 2017 | 1,919,882 | $ | 8.28 |
Shares | Weighted Average Grant Date Fair Value | |||||
Unvested balance at January 1, 2017 | 110,219 | $ | 11.95 | |||
Granted | — | $ | — | |||
Vested | (36,694 | ) | $ | 7.04 | ||
Forfeited | (11,628 | ) | $ | 8.71 | ||
Unvested balance at September 30, 2017 | 61,897 | $ | 7.05 |
Shares | Weighted Average Grant Date Fair Value | |||||
Unvested balance at January 1, 2017 | 147,085 | $ | 12.11 | |||
Granted | 165,000 | $ | 8.41 | |||
Vested | (47,856 | ) | $ | 13.04 | ||
Forfeited | (10,060 | ) | $ | 11.87 | ||
Unvested balance at September 30, 2017 | 254,169 | $ | 9.54 |
Three months ended | Nine months ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Product cost of revenue | $ | 75 | $ | 95 | $ | 261 | $ | 259 | |||||||
Service cost of revenue | 199 | 331 | 777 | 985 | |||||||||||
Research and development | 1,095 | 1,298 | 3,650 | 3,687 | |||||||||||
Sales and marketing | 871 | 3,048 | 1,690 | 5,292 | |||||||||||
General and administrative | 1,647 | 1,636 | 5,009 | 5,241 | |||||||||||
$ | 3,887 | $ | 6,408 | $ | 11,387 | $ | 15,464 |
Three months ended | Nine months ended | ||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||
Verizon Communications Inc. | 16% | * | 15% | * | |||
AT&T Inc. | 11% | 12% | 10% | 13% |
Three months ended | Nine months ended | ||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||
United States | 75 | % | 70 | % | 71 | % | 69 | % | |||
Europe, Middle East and Africa | 8 | 14 | 11 | 13 | |||||||
Japan | 10 | 7 | 11 | 10 | |||||||
Other Asia Pacific | 4 | 5 | 4 | 5 | |||||||
Other | 3 | 4 | 3 | 3 | |||||||
100 | % | 100 | % | 100 | % | 100 | % |
• | expanding our communications network solutions to address emerging UC-, IP- and cloud-based enterprise and service providers; |
• | embracing the principles outlined by 3GPP, 4GPP2 and LTE architectures and delivering the industry's most advanced IMS (IP Multimedia Subsystem)-ready SBC and DSC product suites; |
• | leveraging our TDM (time division multiplexing)-to-IP gateway technology leadership with service providers to accelerate adoption of SIP-enabled UC services; |
• | expanding and broadening our customer base by targeting the enterprise market for SIP trunking and access solutions; |
• | providing an environment for our customers to enable real-time communication to embed into their presence on the worldwide web; |
• | expanding our global sales distribution, marketing and support capabilities; |
• | actively contributing to the SIP standards definition and adoption process; |
• | pursuing strategic transactions and alliances; |
• | successfully implementing our cost reduction initiatives; and |
• | delivering sustainable profitability by continuing to improve our overall performance. |
• | Revenue recognition; |
• | Valuation of inventory; |
• | Loss contingencies and reserves; |
• | Stock-based compensation; |
• | Business combinations; |
• | Goodwill and intangible assets; and |
• | Accounting for income taxes. |
Three months ended | Increase from prior year | |||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Product | $ | 44,120 | $ | 38,601 | $ | 5,519 | 14.3 | % | ||||||
Service | 30,509 | 26,410 | 4,099 | 15.5 | % | |||||||||
Total revenue | $ | 74,629 | $ | 65,011 | $ | 9,618 | 14.8 | % |
Nine months ended | Increase (decrease) from prior year | |||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Product | $ | 98,305 | $ | 108,719 | $ | (10,414 | ) | (9.6 | )% | |||||
Service | 85,425 | 76,300 | 9,125 | 12.0 | % | |||||||||
Total revenue | $ | 183,730 | $ | 185,019 | $ | (1,289 | ) | (0.7 | )% |
Three months ended | Increase from prior year | |||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Maintenance | $ | 24,256 | $ | 22,263 | $ | 1,993 | 9.0 | % | ||||||
Professional services | 6,253 | 4,147 | 2,106 | 50.8 | % | |||||||||
$ | 30,509 | $ | 26,410 | $ | 4,099 | 15.5 | % |
Nine months ended | Increase from prior year | |||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Maintenance | $ | 69,198 | $ | 64,290 | $ | 4,908 | 7.6 | % | ||||||
Professional services | 16,227 | 12,010 | 4,217 | 35.1 | % | |||||||||
$ | 85,425 | $ | 76,300 | $ | 9,125 | 12.0 | % |
Three months ended | Nine months ended | ||||||
Customer | September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||
Verizon Communications Inc. | 16% | * | 15% | * | |||
AT&T Inc. | 11% | 12% | 10% | 13% |
Three months ended | Nine months ended | ||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||
United States | 75 | % | 70 | % | 71 | % | 69 | % | |||
Europe, Middle East and Africa | 8 | 14 | 11 | 13 | |||||||
Japan | 10 | 7 | 11 | 10 | |||||||
Other Asia Pacific | 4 | 5 | 4 | 5 | |||||||
Other | 3 | 4 | 3 | 3 | |||||||
100 | % | 100 | % | 100 | % | 100 | % |
Three months ended | Increase (decrease) from prior year | |||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Cost of revenue | ||||||||||||||
Product | $ | 9,708 | $ | 12,285 | $ | (2,577 | ) | (21.0 | )% | |||||
Service | 10,374 | 9,140 | 1,234 | 13.5 | % | |||||||||
Total cost of revenue | $ | 20,082 | $ | 21,425 | $ | (1,343 | ) | (6.3 | )% | |||||
Gross margin | ||||||||||||||
Product | 78.0 | % | 68.2 | % | ||||||||||
Service | 66.0 | % | 65.4 | % | ||||||||||
Total gross margin | 73.1 | % | 67.0 | % |
Nine months ended | Increase (decrease) from prior year | |||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Cost of revenue | ||||||||||||||
Product | $ | 28,748 | $ | 35,230 | $ | (6,482 | ) | (18.4 | )% | |||||
Service | 30,285 | 27,572 | 2,713 | 9.8 | % | |||||||||
Total cost of revenue | $ | 59,033 | $ | 62,802 | $ | (3,769 | ) | (6.0 | )% | |||||
Gross margin | ||||||||||||||
Product | 70.8 | % | 67.6 | % | ||||||||||
Service | 64.5 | % | 63.9 | % | ||||||||||
Total gross margin | 67.9 | % | 66.1 | % |
Increase from prior year | ||||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Three months ended | $ | 20,798 | $ | 18,230 | $ | 2,568 | 14.1 | % | ||||||
Nine months ended | $ | 61,071 | $ | 53,005 | $ | 8,066 | 15.2 | % |
Decrease from prior year | ||||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Three months ended | $ | 17,454 | $ | 18,103 | $ | (649 | ) | (3.6 | )% | |||||
Nine months ended | $ | 47,850 | $ | 50,890 | $ | (3,040 | ) | (6.0 | )% |
Increase from prior year | ||||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Three months ended | $ | 10,833 | $ | 8,998 | $ | 1,835 | 20.4 | % | ||||||
Nine months ended | $ | 27,993 | $ | 26,656 | $ | 1,337 | 5.0 | % |
Three months ended | Increase from prior year | |||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Interest income | $ | 269 | $ | 217 | $ | 52 | 24.0 | % | ||||||
Interest expense | (9 | ) | (8 | ) | 1 | 12.5 | % | |||||||
Interest income, net | $ | 260 | $ | 209 | $ | 51 | 24.4 | % |
Nine months ended | Increase from prior year | |||||||||||||
September 30, 2017 | September 30, 2016 | $ | % | |||||||||||
Interest income | $ | 800 | $ | 617 | $ | 183 | 29.7 | % | ||||||
Interest expense | (28 | ) | (27 | ) | 1 | 3.7 | % | |||||||
Interest income, net | $ | 772 | $ | 590 | $ | 182 | 30.8 | % |
Nine months ended | |||||||||||
September 30, 2017 | September 30, 2016 | Change | |||||||||
Net loss | $ | (19,538 | ) | $ | (11,301 | ) | $ | (8,237 | ) | ||
Adjustments to reconcile net loss to cash flows provided by operating activities | 23,608 | 26,863 | (3,255 | ) | |||||||
Changes in operating assets and liabilities | 4,977 | (5,514 | ) | 10,491 | |||||||
Net cash provided by operating activities | $ | 9,047 | $ | 10,048 | $ | (1,001 | ) | ||||
Net cash provided by (used in) investing activities | $ | 10,544 | $ | (20,647 | ) | $ | 31,191 | ||||
Net cash used in financing activities | $ | (533 | ) | $ | (7,206 | ) | $ | 6,673 |
• | consolidation within the telecommunications industry, including acquisitions of or by our customers; |
• | general economic conditions in our markets, both domestic and international, as well as the level of discretionary IT spending; |
• | competitive conditions in our markets, including the effects of new entrants, consolidation, technological innovation and substantial price discounting; |
• | fluctuation in demand for our products and services, and the timing and size of customer orders; |
• | fluctuations in foreign exchange rates; |
• | cancellation or deferral of existing customer orders or the renegotiation of existing contractual commitments; |
• | mix of product configurations sold; |
• | length and variability of the sales cycle for our products; |
• | application of complex revenue recognition accounting rules to our customer arrangements; |
• | timing of revenue recognition; |
• | changes in our pricing policies, the pricing policies of our competitors and the prices of the components of our products; |
• | market acceptance of new products, product enhancements and services that we offer; |
• | the quality and level of our execution of our business strategy and operating plan, and the effectiveness of our sales and marketing programs; |
• | new product announcements, introductions and enhancements by us or our competitors, which could result in deferrals of customer orders; |
• | our ability to develop, introduce, ship and successfully deliver new products and product enhancements that meet customer requirements in a timely manner; |
• | our reliance on contract manufacturers for the production and shipment of our hardware products; |
• | our or our contract manufacturers' ability to obtain sufficient supplies of sole or limited source components or materials; |
• | our ability to attain and maintain production volumes and quality levels for our products; |
• | variability and unpredictability in the rate of growth in the markets in which we compete; |
• | costs related to acquisitions; and |
• | corporate restructurings. |
• | economic conditions that discourage potential new customers from making the capital investments required to adopt new technologies; |
• | deterioration in the general financial condition of service providers and enterprises, or their ability to raise capital or access lending sources; |
• | new product introductions by our competitors; and |
• | the development of our channel partner program. |
• | customer willingness to implement our products; |
• | pricing pressures due to the commoditization of our products; |
• | the timing of industry transitions to new network technologies; |
• | acquisitions of or by our customers; |
• | delays or difficulties that we may incur in completing the development and introduction of our planned products or product enhancements; |
• | failure of our products to perform as expected; and |
• | difficulties we may incur in meeting customers' delivery requirements or with software development, hardware design, manufacturing or marketing of our products and/or services. |
• | loss of key employees; |
• | diversion of management's attention from normal daily operations of the business; |
• | diminished ability to respond to customer requirements related to both products and services; |
• | decrease in cash and profits related to severance payments and facility termination costs; |
• | disruption of our engineering and manufacturing processes, which could adversely affect our ability to introduce new products and to deliver products both on a timely basis and in accordance with the highest quality standards; and/or |
• | reduced ability to execute effectively internal administrative processes, including the implementation of key information technology programs. |
• | problems or delays in assimilating or transitioning to us the acquired assets, operations, systems, processes, controls, technologies, products or personnel; |
• | loss of acquired customer accounts; |
• | unanticipated costs associated with the acquisitions; |
• | failure to identify in the due diligence process or assess the magnitude of certain liabilities we assumed in the acquisitions, which could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes due, significant issues with product quality or development or other adverse effects on our business or consolidated financial statements; |
• | multiple or overlapping product lines as a result of the acquisitions that are offered, priced and supported differently, which could cause customer confusion and delays; |
• | higher than anticipated costs in continuing support and development of acquired products; |
• | diversion of management’s attention from our core business and the challenges of managing larger and more widespread operations from the acquisitions; |
• | adverse effects on existing business relationships of Sonus, the SDN Business and/or Taqua with respective suppliers, licensors, contract manufacturers, customers, distributors, resellers and industry experts; |
• | significant impairment, exit and/or restructuring charges if the products or technologies acquired in the acquisitions do not meet our sales expectations or are unsuccessful; |
• | insufficient revenue to offset increased expenses associated with the acquisitions; |
• | risks associated with entering markets in which we have no or limited prior experience; |
• | potential loss of the employees we acquired in the acquisitions or our own employees; and/or |
• | failure to properly integrate internal controls and financial systems of the combined companies. |
• | issue stock that would dilute existing stockholders' percentage ownership; |
• | incur debt or assume liabilities; |
• | reduce significantly our cash and investments; |
• | incur significant impairment charges related to the write-off of goodwill and intangible assets; |
• | incur significant amortization expenses related to intangible assets; and/or |
• | incur large and immediate write-offs for in-process research and development and stock-based compensation. |
• | reduced demand for our products and services as a result of our customers choosing to refrain from building capital intensive networks; |
• | increased price competition for our products, not only from our competitors, but also as a consequence of customers disposing of unutilized products; |
• | risk of excess and obsolete inventories; |
• | excess facilities and manufacturing capacity; and/or |
• | higher overhead costs as a percentage of revenue and higher interest expense. |
• | provide extremely high reliability and quality; |
• | deploy and scale easily and efficiently; |
• | interoperate with existing network infrastructures and multivendor solutions; |
• | provide effective network management; |
• | are accompanied by comprehensive customer support and professional services; |
• | provide a cost-effective and space-efficient solution for enterprises and service providers; |
• | meet price competition from low cost equipment providers; and |
• | offer solutions that are timely for the market and support where the industry is heading. |
• | addition or loss of any major customer; |
• | continued significant declines in customer spending in the media gateway trunking business; |
• | decreased spending by customers in the SBC and/or DSC security businesses; |
• | consolidation of our customers and among our competitors in the telecommunications industry; |
• | changes in the financial condition or anticipated capital expenditure purchases of any existing or potential major customer; |
• | economic conditions for the telecommunications, networking and related industries; |
• | quarterly variations in our bookings, revenues and operating results; |
• | changes in financial estimates by securities analysts; |
• | speculation in the press or investment community; |
• | announcements by us or our competitors of significant contracts, new products or acquisitions, distribution partnerships, joint ventures, mergers or capital commitments; |
• | if the pending Mergers are not consummated; |
• | activism by any single large stockholder or combination of stockholders; |
• | sales of common stock or other securities by us or by our stockholders in the future; |
• | securities and other litigation; |
• | repurchases under our stock buyback program; |
• | announcement of a stock split, reverse stock split, stock dividend or similar event; and/or |
• | emergence or adoption of new technologies or industry standards. |
• | stop selling, incorporating or using our products that use the challenged intellectual property; |
• | obtain from the owner of the infringed intellectual property right a license to sell or use the relevant technology, which license may not be available at acceptable prices, on acceptable terms, or at all; or |
• | redesign those products that use any allegedly infringing technology. |
• | authorizing the Board of Directors to issue shares of preferred stock; |
• | limiting the persons who may call special meetings of stockholders; |
• | prohibiting stockholder actions by written consent; |
• | permitting the Board of Directors to increase the size of the Board and to fill vacancies; |
• | providing indemnification to our directors and officers; |
• | controlling the procedures for conduct and scheduling of Board and stockholder meetings; |
• | requiring a super-majority vote of our stockholders to amend our amended and restated by-laws and certain provisions of our amended and restated certificate of incorporation; |
• | designating the Court of Chancery of the State of Delaware as the sole and exclusive forum for any stockholder to bring any derivative, fiduciary duty and other intra-corporate claims against us, and our directors, officers and other employees, unless we otherwise consent in writing to an alternate forum; and |
• | establishing advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings. |
• | reliance on channel partners; |
• | greater difficulty collecting accounts receivable and longer collection cycles; |
• | difficulties and costs of staffing and managing international operations; |
• | impacts of differing technical standards outside the United States; |
• | compliance with international trade, customs and export control regulations; |
• | reduced protection for intellectual property rights in some countries; |
• | foreign government regulations limiting or prohibiting potential sales or increasing the cost of doing business in such markets, including reversals or delays in the opening of foreign markets to new competitors or the introduction of new technologies; |
• | challenging pricing environments in highly competitive new markets; |
• | foreign currency exchange controls, restrictions on repatriation of cash and changes in currency exchange rates; |
• | potentially adverse tax consequences; and |
• | political, social and economic instability, including as a result of the fragility of global financial markets, health pandemics or epidemics and/or acts of war or terrorism. |
• | loss of, or delay in, revenues or increased expense; |
• | loss of customers and market share; |
• | failure to attract new customers or achieve market acceptance for our products; |
• | increased service, support and warranty costs and a diversion of development resources; and/or |
• | costly and time-consuming legal actions by our customers. |
• | loss of customers and market share; |
• | failure to attract new customers in new markets and geographies; |
• | increased service, support and warranty costs and a diversion of development resources; and/or |
• | network performance penalties. |
• | loss of, or delay in, revenues; |
• | increased service, support and warranty costs and a diversion of development resources; and |
• | network performance penalties. |
• | loss of customers and market share; and |
• | failure to attract new customers or achieve market acceptance for our products. |
• | difficulty hiring and retaining appropriate engineering and management resources due to intense competition for such resources and resulting wage inflation; |
• | knowledge transfer related to our technology and resulting exposure to misappropriation of intellectual property or information that is proprietary to us, our customers and other third parties; |
• | heightened exposure to changes in economic, security and political conditions in India; and |
• | fluctuations in currency exchange rates and tax compliance in India. |
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3) | |||||||||
July 1, 2017 to July 31, 2017 | 79 | $ | 7.78 | — | $ | 5,429,481 | |||||||
August 1, 2017 to August 31, 2017 | 14,468 | $ | 6.88 | — | $ | 5,429,481 | |||||||
September 1, 2017 to September 30, 2017 | 56,234 | $ | 7.08 | — | $ | 5,429,481 | |||||||
Total | 70,781 | $ | 7.04 | — | $ | 5,429,481 |
Exhibit No. | Description | ||
* | Certificate of Sonus Networks, Inc. Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
* | Certificate of Sonus Networks, Inc. Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
# | Certificate of Sonus Networks, Inc. Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
# | Certificate of Sonus Networks, Inc. Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
* | Filed herewith. |
# | Furnished herewith. |
Date: October 26, 2017 | SONUS NETWORKS, INC. |
By: | /s/ Susan M. Villare |
Susan M. Villare Chief Financial Officer (Interim) (Principal Financial Officer and Principal Accounting Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Sonus Networks, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Raymond P. Dolan | |
Raymond P. Dolan President and Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Sonus Networks, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Susan M. Villare | |
Susan M. Villare Chief Financial Officer (Interim) (Principal Financial Officer) |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Raymond P. Dolan | |
Raymond P. Dolan President and Chief Executive Officer (Principal Executive Officer) |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Susan M. Villare | |
Susan M. Villare Chief Financial Officer (Interim) (Principal Financial Officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 18, 2017 |
|
Document And Entity Information | ||
Entity Registrant Name | SONUS NETWORKS INC | |
Entity Central Index Key | 0001105472 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 50,071,956 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 317 | $ 10 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 120,000,000 | 120,000,000 |
Common stock, shares issued | 49,945,286 | 49,041,881 |
Common stock, shares outstanding | 49,945,286 | 49,041,881 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Revenue: | ||||
Product | $ 44,120 | $ 38,601 | $ 98,305 | $ 108,719 |
Service | 30,509 | 26,410 | 85,425 | 76,300 |
Total revenue | 74,629 | 65,011 | 183,730 | 185,019 |
Cost of revenue: | ||||
Product | 9,708 | 12,285 | 28,748 | 35,230 |
Service | 10,374 | 9,140 | 30,285 | 27,572 |
Total cost of revenue | 20,082 | 21,425 | 59,033 | 62,802 |
Gross profit | 54,547 | 43,586 | 124,697 | 122,217 |
Operating expenses: | ||||
Research and development | 20,798 | 18,230 | 61,071 | 53,005 |
Sales and marketing | 17,454 | 18,103 | 47,850 | 50,890 |
General and administrative | 10,833 | 8,998 | 27,993 | 26,656 |
Acquisition-related | 1,543 | 951 | 6,278 | 951 |
Restructuring | 0 | 1,620 | 1,071 | 1,620 |
Total operating expenses | 50,628 | 47,902 | 144,263 | 133,122 |
Income (loss) from operations | 3,919 | (4,316) | (19,566) | (10,905) |
Interest income, net | 260 | 209 | 772 | 590 |
Other income, net | 1 | 803 | 577 | 916 |
Income (loss) before income taxes | 4,180 | (3,304) | (18,217) | (9,399) |
Income tax provision | (727) | (427) | (1,321) | (1,902) |
Net income (loss) | $ 3,453 | $ (3,731) | $ (19,538) | $ (11,301) |
Earnings (loss) per share: | ||||
Basic (in dollars per share) | $ 0.07 | $ (0.08) | $ (0.39) | $ (0.23) |
Diluted (in dollars per share) | $ 0.07 | $ (0.08) | $ (0.39) | $ (0.23) |
Shares used to compute earnings (loss) per share: | ||||
Basic (in shares) | 49,753 | 49,402 | 49,472 | 49,436 |
Diluted (in shares) | 50,131 | 49,402 | 49,472 | 49,436 |
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 3,453 | $ (3,731) | $ (19,538) | $ (11,301) |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments | (13) | 49 | 102 | 484 |
Unrealized gain (loss) on available-for sale marketable securities, net of tax | 43 | (112) | 12 | 160 |
Reclassification adjustment for realized losses included in net loss | 0 | 0 | 0 | 18 |
Other comprehensive income (loss), net of tax | 30 | (63) | 114 | 662 |
Comprehensive income (loss), net of tax | $ 3,483 | $ (3,794) | $ (19,424) | $ (10,639) |
BASIS OF PRESENTATION |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION Business Sonus Networks, Inc. (“Sonus” or the “Company”) is a leading provider of networked solutions for communications service providers (e.g., telecommunications, wireless and cable service providers) and enterprises to help them secure and unify their real-time communications infrastructures. Sonus helps many of the world's leading communications service providers and enterprises embrace the next generation of Session Initiation Protocol ("SIP") and 4G/LTE (Long-Term Evolution)-based solutions, including Voice over IP ("VoIP"), Voice over WiFi ("VoWiFi"), video and Unified Communications ("UC") through secure, reliable and scalable Internet Protocol ("IP") networks. Sonus' products include session border controllers ("SBCs"), diameter signaling controllers ("DSCs") and VoWiFi solutions, which are supported by a global services team with experience in the design, deployment and maintenance of the world's largest IP networks. Sonus' communications solutions provide a secure way for its customers to link and leverage multivendor, multiprotocol communications systems and applications across their networks, around the world and in a rapidly changing ecosystem of IP-enabled devices such as smartphones and tablets. Sonus' solutions help realize the intended value and benefits of UC platforms by allowing disparate communications environments, commonplace in most enterprises today, to work seamlessly together. Likewise, Sonus' solutions facilitate the evolution to cloud-based delivery of UC solutions. Pending Merger On May 23, 2017, Sonus entered into an Agreement and Plan of Merger (the “Merger Agreement”) with (i) Solstice Sapphire Investments, Inc. ("NewCo") and its wholly-owned subsidiaries and (ii) GENBAND Holdings Company ("GENBAND") and its two related holding companies such that, following a series of merger transactions (collectively, the "Mergers"), both the Company and GENBAND will each become a wholly-owned subsidiary of NewCo. Former stockholders of the Company will own approximately 50%, and former shareholders of GENBAND and the two related holding companies will own approximately 50%, of the shares of NewCo common stock issued and outstanding immediately following the consummation of the Mergers. GENBAND is a Cayman Islands exempted company limited by shares that was formed on April 7, 2010. Through its wholly owned operating subsidiaries, GENBAND creates rapid communications and applications for service providers, enterprises, independent software vendors, system integrators and developers globally. A majority of GENBAND's shares are held by funds affiliated with One Equity Partners. GENBAND shares are not listed on an exchange or quoted on any automated services, and there is no established trading market for GENBAND shares. The Company believes that Sonus' and GENBAND's complementary products, solutions and strategies position the combined company to deliver comprehensive solutions to service providers and enterprises migrating to a virtualized all-IP environment in an expanded customer and global footprint. Pursuant to the Merger Agreement, NewCo will issue shares to the GENBAND equity holders, with the number of shares issued in the aggregate to the GENBAND equity holders equal to the number of shares of the Company’s common stock outstanding immediately prior to the closing date of the Mergers. In addition, NewCo will repay GENBAND’s long-term debt, including both principal and unpaid interest, to a related party totaling approximately $48 million and repay GENBAND’s management fees due to a representative of a majority shareholder totaling $10.3 million. NewCo will also pay an estimated $9.0 million of NewCo's transaction fees incurred in connection with the Mergers and issue a promissory note for $22.5 million to certain GENBAND equity holders. NewCo will assume the liability under GENBAND's revolving credit facility with Silicon Valley Bank (the "GENBAND facility"), which had outstanding borrowings and letters of credit totaling $18.0 million and $2.9 million, respectively, at October 26, 2017. At October 26, 2017, the outstanding borrowings had an average interest rate of 4.67%. The Company's Board of Directors unanimously approved the Merger Agreement and the transactions contemplated thereby. The Company held a special meeting of the Company's stockholders (the “Special Stockholders’ Meeting”) on Thursday, October 26, 2017, at which the Company's stockholders voted to, among other things, adopt the Merger Agreement. The Company expects that the Mergers will be consummated on Friday, October 27, 2017. Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring items, necessary for their fair presentation with accounting principles generally accepted in the United States of America ("GAAP") and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Interim results are not necessarily indicative of results for a full year or any future interim period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2016 (the "Annual Report"), which was filed with the SEC on February 27, 2017. Significant Accounting Policies The Company's significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in the Annual Report. There were no material changes to the significant accounting policies during either the three or nine months ended September 30, 2017. Principles of Consolidation The condensed consolidated financial statements include the accounts of Sonus and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Use of Estimates and Judgments The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and judgments relied upon in preparing these consolidated financial statements include accounting for business combinations, revenue recognition for multiple element arrangements, inventory valuations, assumptions used to determine the fair value of stock-based compensation, intangible assets and goodwill valuations, including impairments, legal contingencies and recoverability of Sonus' net deferred tax assets and the related valuation allowances. Sonus regularly assesses these estimates and records changes in estimates in the period in which they become known. Sonus bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates. Fair Value of Financial Instruments The carrying amounts of the Company's financial instruments, which include cash equivalents, marketable securities, investments, accounts receivable, accounts payable and other long-term liabilities, approximate their fair values. Operating Segments The Company operates in a single segment. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance. To date, the chief operating decision maker has made such decisions and assessed performance at the company level, as one segment. The Company's chief operating decision maker is its President and Chief Executive Officer. Recent Accounting Pronouncements Any forward-looking statements regarding the potential impact of recent accounting pronouncements do not include the potential impact of the pending merger with GENBAND. In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"), which amends the scope of modification accounting for share-based payment arrangements. ASU 2017-09 provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Accounting Standards Codification ("ASC") 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective for the Company beginning January 1, 2018 for both interim and annual reporting periods, with early adoption permitted. The Company does not expect the adoption of ASU 2017-09 will have a material impact on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test. As a result, under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, ASU 2017-04 clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units in connection with an entity's testing of reporting units for goodwill impairment; clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable; and makes minor changes to other related guidance within the ASC. ASU 2017-04 is effective prospectively for the Company beginning January 15, 2020, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company elected to early-adopt ASU 2017-04 as of January 1, 2017; such early adoption did not have a material impact on the Company's consolidated financial results. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16"), which removes the prohibition in ASC 740, Income Taxes, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. ASU 2016-16 is intended to reduce the complexity of GAAP and diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. ASU 2016-16 is effective for the Company beginning January 1, 2019 for both interim and annual reporting periods. The Company does not believe that the adoption of ASU 2016-16 will have a material impact on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"), which amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU 2016-15 is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. ASU 2016-15 adds or clarifies guidance on eight cash flow issues, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or certain other debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for the Company beginning January 1, 2018 for both interim and annual reporting periods, with early adoption permitted. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. The Company does not expect the adoption of ASU 2016-15 will have a material impact on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which adds an impairment model that is based on expected losses rather than incurred losses. Under ASU 2016-13, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 is effective for the Company beginning January 1, 2020 for both interim and annual reporting periods, with early adoption permitted. The Company does not expect the adoption of ASU 2016-13 will have a material impact on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 became effective for the Company beginning January 1, 2017 for both interim and annual reporting periods. Under ASU 2016-09, the Company will now recognize unrealized excess tax benefits. Due to the Company's full valuation allowance on its federal and state income taxes, the adoption of ASU 2016-09 did not have a material impact on the Company's accounting for income taxes. Without the valuation allowance, the Company would have recognized an increased deferred tax asset approximating $5 million. The Company has elected to continue to apply forfeiture rates to its expense attribution related to stock options, restricted stock awards and restricted stock units, as the Company believes that such continued application results in more accurate expense attribution over the life of these equity grants. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) Section A - Leases: Amendments to the FASB Accounting Standards Codification ("ASU 2016-02"), its new standard on accounting for leases. ASU 2016-02 introduces a lessee model that brings most leases onto the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB's new revenue recognition standard (i.e., those related to evaluating when profit can be recognized). Furthermore, ASU 2016-02 addresses other concerns related to the current leases model. For example, ASU 2016-02 eliminates the current GAAP requirement for an entity to use bright-line tests in determining lease classification. ASU 2016-02 is effective for the Company for both interim and annual periods beginning January 1, 2019. Upon adoption of ASU 2016-02, the Company will recognize lease obligations for the right to use these assets in connection with its existing lease agreements. The Company is currently assessing the potential impact of the adoption of ASU 2016-02 on its consolidated financial statements and accordingly, such amounts to be recognized in the balance sheet have yet to be determined. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory ("ASU 2015-11"), which simplifies the measurement of inventory by requiring entities to measure most inventory at the lower of cost and net realizable value, replacing the previous requirement to measure most inventory at the lower of cost or market. ASU 2015-11 does not apply to inventories that are measured by using either the last-in, first-out method or the retail inventory method. ASU 2015-11 became effective for the Company for both interim and annual reporting periods beginning January 1, 2017. The adoption of ASU 2015-11 did not have a material impact on the Company's consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), its final standard on revenue from contracts with customers, along with additional ASUs which, among other things, clarified the implementation of the new revenue guidance and delayed the adoption by one year, to January 1, 2018 (collectively, the "New Revenue Standard"). The New Revenue Standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue model to contracts within its scope, an entity identifies the contract(s) with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to the performance obligations in the contract and recognizes revenue when (or as) the entity satisfies a performance obligation. The New Revenue Standard applies to all contracts with customers that are within the scope of other topics in the ASC. Certain of the New Revenue Standard's provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities (i.e., property, plant and equipment; real estate; or intangible assets). Existing accounting guidance applicable to these transfers has been amended or superseded. The Company continues to assess the potential impact of the adoption of the New Revenue Standard on its consolidated financial statements, and currently believes that such adoption will, in general, accelerate the recognition of revenue (i.e., more revenue will be recognized upon delivery than is currently recognized ratably or upon payment) compared to the current standards in effect, in particular, sales of software-only products and sales to customers currently accounted for on a cash basis. The Company currently expects to adopt the New Revenue Standard using the modified retrospective option, and is in the process of updating its revenue recognition software to comply with the New Revenue Standard. Under the modified retrospective method, the Company will apply the New Revenue Standard to all contracts not yet completed as of January 1, 2018, recognizing in beginning Accumulated deficit an adjustment for the cumulative effect of the change and providing additional disclosures comparing results to those as if the Company were still following the previous accounting standards. The Company currently expects that the adjustment to Accumulated deficit will be approximately $1 million. |
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BUSINESS ACQUISITIONS | BUSINESS ACQUISITION Acquisition of Taqua, LLC On September 26, 2016 (the "Taqua Acquisition Date"), the Company acquired Taqua, LLC ("Taqua"), a leading supplier of IP communications systems, applications and services to mobile and fixed operators. Taqua enables the transformation of software-based service provider networks to deliver next-generation voice, video and messaging services, including VoIP, VoWiFi and Voice over Long-Term Evolution ("VoLTE"). The acquisition of Taqua has, among other things, accelerated the Company's mobile strategy by adding a Virtualized Mobile Core ("VMC") Platform and an IP Multimedia Subsystem ("IMS") Service Core and expanded the Company's fixed portfolio by adding a Class 5 Softswitch (the T7000) for network transformation projects and a Multimedia Controller used in IP Peering applications (the T7100), both of which are complementary to Sonus' current product offerings. In consideration for the acquisition of Taqua, Sonus paid $19.9 million in cash to the sellers on the Taqua Acquisition Date, net of cash acquired. The Company also entered into an Earn-Out Agreement, dated as of September 26, 2016, with Taqua Holdings, LLC and Jeffrey L. Brawner, the seller representative in the transaction, under which there is the potential for additional cash payments of up to $65.0 million in the aggregate to the sellers if certain annual revenue thresholds are exceeded as measured annually through 2020. The Company had initially recorded $10.0 million of contingent consideration as of the Taqua Acquisition Date, with the estimate based on historical sales and probability weighted cash flows related to forecasted sales. During the fourth quarter of 2016, the Company reassessed the historical and updated forecasted sales and accordingly, reversed the previous estimated contingent consideration such that as of both September 30, 2017 and December 31, 2016, no incremental contingent consideration was recorded. The transaction has been accounted for as a business combination and the financial results of Taqua have been included in the Company's condensed consolidated financial statements for the period subsequent to its acquisition. The Company finalized its valuation of the identifiable intangible assets in the second quarter of 2017. During both the first quarter of 2017 and the fourth quarter of 2016, the Company recorded changes to the initial preliminary purchase price allocation. The primary adjustments in the first quarter of 2017 were a $0.4 million increase to current liabilities and a $0.1 million increase to noncurrent liabilities. The primary adjustments recorded in the fourth quarter of 2016 were the reversal of the $10.0 million of previously recorded contingent consideration discussed above, a reduction of $12.1 million to the developed technology intangible asset and an increase of $5.5 million to the customer relationship intangible assets. These adjustments, as well as other immaterial adjustments to the balance sheet accounts, resulted in a net reduction to goodwill of $2.2 million since September 30, 2016. Based on this final purchase price allocation, the Company recorded $9.6 million of goodwill, which is primarily due to expected synergies between the combined companies and expanded market opportunities resulting from the expanded product offering portfolio. The goodwill is deductible for tax purposes. A summary of the final allocation of the purchase consideration for Taqua is as follows (in thousands):
The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company used an income approach to value the acquired developed technology and customer relationship intangible assets. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets, discounted to the present value at discount rates commensurate with perceived risk. The valuation assumptions take into consideration the Company's estimates of technology attrition and revenue growth projections. The Company is amortizing the identifiable intangible assets in relation to the expected cash flows from the individual intangible assets over their respective useful lives (see Note 6). The Company has not provided pro forma financial information, as the historical amount are not significant to the Company's consolidated financial statements. Acquisition-Related Expenses Acquisition-related expenses include those expenses related to acquisitions that would otherwise not have been incurred by the Company. These expenses include professional, services and other costs, such as legal, audit, consulting, paying agent and other related expenses. The expense recorded in the three months ended September 30, 2017 relates to the pending merger with GENBAND. The expense recorded in the nine months ended September 30, 2017 primarily relates to the pending merger with GENBAND, plus approximately $56,000 of costs related to the Taqua acquisition. The acquisition-related expense recorded in both the three and nine months ended September 30, 2016 relates to the acquisition of Taqua. The Company's acquisition-related expense for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):
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EARNINGS (LOSS) PER SHARE |
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EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. For periods in which the Company reports net income, diluted net earnings per share is determined by using the weighted average number of common and dilutive common equivalent shares outstanding during the period unless the effect is antidilutive. The calculations of shares used to compute basic and diluted earnings (loss) per share are as follows (in thousands):
The Company has excluded 5.2 million weighted shares underlying options to purchase shares of the Company's common stock from the computation of diluted earnings per share for the three months ended September 30, 2017 because the options' exercise prices were greater than the average market price for the common stock and their effect would have been antidilutive. Options to purchase the Company's common stock and unvested shares of restricted and performance-based stock aggregating 7.4 million shares have not been included in the computation of diluted loss per share for the nine months ended September 30, 2017 because their effect would have been antidilutive. Options to purchase the Company's common stock, unvested shares of restricted and performance-based stock and shares in connection with future purchases under the Company's Amended and Restated 2000 Employee Stock Purchase Plan, as amended (the "ESPP"), totaling 8.2 million shares for the three and nine months ended September 30, 2016 have not been included in the computation of diluted loss per share because their effect would have been antidilutive. |
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Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CASH EQUIVALENTS, MARKETABLE SECURITIES AND INVESTMENTS | CASH EQUIVALENTS AND INVESTMENTS The Company invests in debt instruments, primarily U.S. government-backed, municipal and corporate obligations, which management believes to be high quality (investment grade) credit instruments. During the nine months ended September 30, 2016, the Company sold $3.8 million of its available-for-sale securities and recognized gross losses aggregating $18,000, which is included as a component of Other income, net, in the Company's condensed consolidated statement of operations for that period. The Company did not sell any of its available-for-sale securities in the nine months ended September 30, 2017. Investments with continuous unrealized losses for one year or greater at September 30, 2017 were nominal. However, the Company currently intends to liquidate approximately $50 million of marketable securities in the fourth quarter of 2017 in connection with the cash payments due for the pending merger with GENBAND. As a result of this planned liquidation, the Company expects to recognize losses of approximately $60,000. On a quarterly basis, the Company reviews its marketable securities and investments to determine if there have been any events that could create a credit impairment. Based on its reviews, the Company does not believe that any impairment existed with its current holdings at September 30, 2017. The amortized cost, gross unrealized gains and losses and fair value of the Company's marketable debt securities and investments at September 30, 2017 and December 31, 2016 were comprised of the following (in thousands):
The Company's available-for-sale debt securities classified as Investments in the condensed consolidated balance sheets at September 30, 2017 and December 31, 2016 had maturity dates after one year but within approximately two years or less from the balance sheet date. Fair Value Hierarchy Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tier fair value hierarchy is based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows: Level 1. Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2. Level 2 applies to assets or liabilities for which there are inputs that are directly or indirectly observable in the marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets). Level 3. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The following table shows the fair value of the Company's financial assets at September 30, 2017 and December 31, 2016. These financial assets are comprised of the Company's available-for-sale debt securities and reported under the captions Cash and cash equivalents, Marketable securities and Investments in the condensed consolidated balance sheets (in thousands):
The Company's marketable securities and investments have been valued with the assistance of valuations provided by third-party pricing services, as derived from such services' pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker/dealer quotations, prices or yields of securities with similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. The Company is ultimately responsible for the condensed consolidated financial statements and underlying estimates. Accordingly, the Company assesses the reasonableness of the valuations provided by the third-party pricing services by reviewing actual trade data, broker/dealer quotes and other similar data, which are obtained from quoted market prices or other sources. |
INVENTORY |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORY | INVENTORY Inventory at September 30, 2017 and December 31, 2016 consists of the following (in thousands):
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INTANGIBLE ASSETS AND GOODWILL |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS AND GOODWILL | INTANGIBLE ASSETS AND GOODWILL The Company's intangible assets at September 30, 2017 and December 31, 2016 consist of the following (dollars in thousands):
Amortization expense for intangible assets for the three and nine months ended September 30, 2017 and 2016 was as follows (in thousands):
Estimated future amortization expense for the Company's intangible assets at September 30, 2017 is as follows (in thousands):
The changes in the carrying value of the Company's goodwill in the nine months ended September 30, 2017 were as follows (in thousands):
The changes in the carrying value of the Company's goodwill in the nine months ended September 30, 2016 were as follows (in thousands):
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ACCRUED EXPENSES |
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ACCRUED EXPENSES | ACCRUED EXPENSES Accrued expenses at September 30, 2017 and December 31, 2016 consist of the following (in thousands):
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RESTRUCTURING ACCRUAL |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESTRUCTURING ACCRUAL | RESTRUCTURING ACCRUAL 2016 Restructuring Initiative In July 2016, the Company announced a program to further accelerate its investment in new technologies as the communications industry migrates to a cloud-based architecture (the "2016 Restructuring Initiative"), and that it planned to utilize most of the savings from this initiative to shift headcount toward new strategic initiatives, such as new products and an expanded go-to-market footprint in selected geographies and discrete vertical markets. The Company recorded $2.0 million of restructuring expense in the aggregate in connection with this initiative, comprised of $1.9 million for severance and related costs and $0.1 million to abandon its facility in Rochester, New York (the "Rochester Facility"). The actions under the 2016 Restructuring Initiative have been implemented and accordingly, the Company does not expect to record additional expense in connection with this initiative. The amounts accrued for severance and related costs had been fully paid by the end of the third quarter of 2017. The Company expects that the amounts accrued for facilities will be paid by the end of October 2019, when the lease on the Rochester Facility expires. In connection with the 2016 Restructuring Initiative, the Company recorded $0.5 million of restructuring expense in the nine months ended September 30, 2017. The amount recorded in the nine months ended September 30, 2017 is comprised of $0.4 million for severance and related costs and $0.1 million related to the Company's Rochester Facility. The Company did not record restructuring expense in the three months ended September 30, 2017. A summary of the 2016 Restructuring Initiative accrual activity for the nine months ended September 30, 2017 is as follows (in thousands):
Taqua Restructuring Initiative In connection with the acquisition of Taqua, the Company's management approved a restructuring plan in the third quarter of 2016 to eliminate certain redundant positions within the combined companies. On October 24, 2016, the Audit Committee of the Company's Board of Directors approved a broader Taqua restructuring plan related to headcount and redundant facilities (both restructuring plans, the "Taqua Restructuring Initiative"). The Company recorded $1.8 million of restructuring expense in the aggregate in connection with this initiative, comprised of $1.2 million for severance and related costs and $0.6 million related to the elimination of redundant facilities. The actions under the Taqua Restructuring Initiative have been implemented and accordingly, the Company does not expect to record additional expense in connection with this initiative. The amounts accrued for severance and related costs had been fully paid by the end of the third quarter of 2017. The Company expects that the amounts accrued for facilities will be paid by the end of 2018. In connection with the Taqua Restructuring Initiative, the Company recorded $0.6 million of restructuring expense in the nine months ended September 30, 2017, comprised of $0.2 million for severance and related costs and $0.4 million related to redundant facilities. The Company did not record restructuring expense in the three months ended September 30, 2017. A summary of the Taqua Restructuring Initiative accrual activity for the nine months ended September 30, 2017 is as follows (in thousands):
2015 Restructuring Initiative To better align the Company's cost structure to its current revenue expectations, in April 2015, the Company announced a cost reduction review and restructuring initiative (the "2015 Restructuring Initiative"). A summary of the 2015 Restructuring Initiative accrual activity for the nine months ended September 30, 2017 is as follows (in thousands):
Balance Sheet Classification At September 30, 2017, the Company's restructuring accruals aggregated $0.4 million, of which $0.2 million was included in Other long-term liabilities and represented future lease payments on restructured facilities. At December 31, 2016, the Company's restructuring accruals aggregated $1.3 million, of which approximately $62,000 was included in Other long-term liabilities and represented future lease payments on restructured facilities. The remainder of the restructuring accruals at both September 30, 2017 and December 31, 2016 are included in Accrued expenses in the condensed consolidated balance sheets. |
DEBT |
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Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT The Company maintained a credit agreement by and among the Company, as Borrower, Bank of America, N.A. ("Bank of America"), as Administrative Agent, Swing Line Lender and L/C Issuer, and the other lenders from time to time party thereto entered into on June 27, 2014 (the "Credit Agreement"), which agreement was amended by a First Amendment to Credit Agreement on June 26, 2015 and further amended by a Second Amendment to Credit Agreement on June 13, 2016 (the "Amended Credit Agreement"). The obligations of the Company under the Amended Credit Agreement were guaranteed by Sonus International, Inc., Sonus Federal, Inc., Network Equipment Technologies, Inc. and Taqua (collectively with the Company, the "Loan Parties") pursuant to a Master Continuing Guaranty and were secured by the assets of the Loan Parties pursuant to a Security and Pledge Agreement. The credit facility expired by its terms on June 30, 2017 and was not renewed. The Company did not have any amounts outstanding under the Amended Credit Agreement at December 31, 2016. |
COMMON STOCK REPURCHASES (Notes) |
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Sep. 30, 2017 | |
Equity [Abstract] | |
COMMON STOCK REPURCHASES | COMMON STOCK REPURCHASES On July 29, 2013, the Company announced that its Board of Directors had authorized a stock buyback program to repurchase up to $100 million of the Company's common stock from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. The Company may elect to implement a 10b5-1 repurchase program, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The Company has not implemented such a 10b5-1 repurchase program to date. The stock buyback program may be suspended or discontinued at any time. The stock buyback program is funded with the Company's working capital. The Company did not repurchase any shares during the nine months ended September 30, 2017. During the nine months ended September 30, 2016, the Company spent $7.1 million, including transaction fees, to repurchase and retire 0.9 million shares of its common stock under the stock buyback program. At September 30, 2017, the Company had $5.4 million remaining under the stock buyback program for future repurchases. |
STOCK-BASED COMPENSATION PLANS |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION PLANS | STOCK-BASED COMPENSATION PLANS Amended and Restated Stock Incentive Plan The Company's Amended and Restated Stock Incentive Plan, as amended (the "Plan"), provides for the award of options to purchase the Company's common stock ("stock options"), stock appreciation rights ("SARs"), restricted common stock awards ("RSAs"), restricted common stock units ("RSUs"), performance-based stock awards ("PSAs"), performance-based stock units ("PSUs") and other stock-based awards to employees, officers, directors (including those directors who are not employees or officers of the Company), consultants and advisors of the Company and its subsidiaries. At its 2017 annual meeting of stockholders held on June 9, 2017 (the "2017 Annual Meeting"), the Company's stockholders approved amendments to the Plan including, among other things, to:
Executive Equity Arrangements On March 31, 2017, the Company granted an aggregate of 165,000 PSUs with both market and service conditions to five of its executives (the "2017 PSUs"). The terms of the 2017 PSUs are such that up to one-third of the shares subject to the 2017 PSUs will vest on each of the first, second and third anniversaries of the date of grant (collectively, the "2017 PSU Vesting Dates") to the extent of achievement of the Company's total shareholder return ("TSR") compared to the TSR of the companies included in the NASDAQ Telecommunications Index for the same fiscal year, measured by the Compensation Committee after each of the 2017, 2018 and 2019 fiscal years, respectively (as used in this paragraph, each, a "Performance Period"). The shares determined to be earned will vest on the anniversary of the grant date following each Performance Period. Shares subject to the 2017 PSUs that fail to be earned will be forfeited. The 2017 PSUs include a market condition that required the use of a Monte Carlo simulation approach to model future stock price movements based upon the risk-free rate of return, the volatility of each entity, and the pair-wise covariance between each entity. These results were then used to calculate the grant date fair values of the 2017 PSUs. Because the 2017 PSUs have market conditions, the Company is required to record expense for the 2017 PSUs through the final 2017 PSU Vesting Date of March 31, 2020, regardless of the number of shares that are ultimately earned. On April 1, 2016, the Company granted an aggregate of 131,250 PSUs with both market and service conditions to six of its executives (the "2016 PSUs"). The terms of the 2016 PSUs are such that up to one-third of the shares subject to the 2016 PSUs will vest on each of the first, second and third anniversaries of the date of grant (collectively, the "2016 PSU Vesting Dates") to the extent of achievement of the Company's TSR compared to the TSR of the companies included in the NASDAQ Telecommunications Index for the same fiscal year, measured by the Compensation Committee of the Company's Board of Directors (the "Compensation Committee") after each of the 2016, 2017 and 2018 fiscal years, respectively (as used in this paragraph, each, a "Performance Period"). The shares determined to be earned will vest on the anniversary of the grant date following each Performance Period. Shares subject to the 2016 PSUs that fail to be earned will be forfeited. The 2016 PSUs include a market condition that required the use of a Monte Carlo simulation approach to model future stock price movements based upon the risk-free rate of return, the volatility of each entity, and the pair-wise covariance between each entity. These results were then used to calculate the grant date fair values of the 2016 PSUs. Because the 2016 PSUs have market conditions, the Company is required to record expense for the 2016 PSUs through the final 2016 PSU Vesting Date of April 1, 2019, regardless of the number of shares that are ultimately earned. In February 2017, the Compensation Committee determined that the performance metrics for the 2016 PSUs for the 2016 Performance Period had been achieved at the 90.4% level, and accordingly, 24,106 shares in the aggregate were released to the four executives holding such outstanding grants on March 16, 2017. The unearned shares relating to the 2016 Performance Period, aggregating 2,560 shares, were forfeited on March 16, 2017. These amounts are included in the performance-based units table below. On March 16, 2015, the Company granted an aggregate of 131,250 PSUs with both market and service conditions to eight of its executives (the "2015 PSUs"). In 2015, subsequent to the grant date, two executives separated from the Company and, in accordance with their respective employment agreements with the Company, the Company accelerated the vesting of certain unvested 2015 PSUs. The terms of the 2015 PSUs are such that up to one-third of the shares subject to the 2015 PSUs will vest on each of the first, second and third anniversaries of the date of grant (collectively, the "2015 PSU Vesting Dates") to the extent of achievement of the Company's TSR compared to the TSR of the companies included in the NASDAQ Telecommunications Index for the same Performance Period, measured by the Compensation Committee at the end of each of the 2015, 2016 and 2017 fiscal years, respectively (as used in this paragraph, each, a "Performance Period"). The shares determined to be earned will vest on the anniversary of the grant date following each Performance Period. Shares subject to the 2015 PSUs that fail to be earned will be forfeited. The 2015 PSUs include a market condition that required the use of a Monte Carlo simulation approach to calculate the grant date fair values of the 2015 PSUs. Because the 2015 PSUs have market conditions, the Company is required to record expense for the 2015 PSUs through the final 2015 PSU Vesting Date of March 16, 2018, regardless of the number of shares that are ultimately earned, if any. In February 2017, the Compensation Committee determined that the performance metrics for the 2015 PSUs for the 2016 Performance Period had been achieved at the 76.0% level, and accordingly, 23,750 shares in the aggregate were released to the four executives holding such outstanding grants on April 1, 2017. The unearned shares relating to the 2016 Performance Period, aggregating 7,500 shares, were forfeited on April 1, 2017. These amounts are included in the performance-based units table below. Stock Options The activity related to the Company's outstanding stock options for the nine months ended September 30, 2017 is as follows:
The grant date fair values of options to purchase common stock granted in the three and nine months ended September 30, 2017 were estimated using the Black-Scholes valuation model with the following assumptions:
Additional information regarding the Company's stock options for the three and nine months ended September 30, 2017 is as follows:
Restricted Stock Awards and Units The activity related to the Company's RSAs for the nine months ended September 30, 2017 is as follows:
The activity related to the Company's RSUs for the nine months ended September 30, 2017 is as follows:
The total fair value of shares of restricted stock granted under RSAs and RSUs that vested during the nine months ended September 30, 2017 was $8.8 million. Performance-Based Stock Units The activity related to the Company's PSUs for the nine months ended September 30, 2017 is as follows:
The total fair value of shares of restricted stock granted under PSUs that vested during the nine months ended September 30, 2017 was $0.6 million. The Company did not have outstanding PSAs during the nine months ended September 30, 2017 or at December 31, 2016. Employee Stock Purchase Plan The Company's ESPP provides for six-month offering periods with the purchase price of the stock equal to 85% of the lesser of the market price on the first or last day of the offering period. The maximum number of shares of common stock an employee may purchase during each offering period is 500, subject to certain adjustments pursuant to the ESPP. In May 2017, the Compensation Committee determined to suspend all offering periods under the ESPP, effective September 1, 2017 until such time after the closing of the pending merger with GENBAND as the Compensation Committee determines is best in its sole discretion. Stock-Based Compensation The condensed consolidated statements of operations include stock-based compensation for the three and nine months ended September 30, 2017 and 2016 as follows (in thousands):
During the three months ended March 31, 2017, the Company reversed $1.0 million of incremental expense to correct an error in 2016 related to the acceleration of certain stock awards held by an executive who separated from the Company in 2016. Management had reviewed and considered the impact of the error and determined that it was not material to the Company's consolidated financial results for the third and fourth quarters of 2016, as well as the 2016 fiscal year. Management has also determined that the correction of this error is not material to the results of operations for the 2017 completed reporting periods. There is no income tax benefit for employee stock-based compensation expense for the nine months ended September 30, 2017 or September 30, 2016 due to the valuation allowance recorded. At September 30, 2017, there was $15.4 million, net of expected forfeitures, of unrecognized stock-based compensation expense related to unvested stock options, awards, units and ESPP shares. This expense is expected to be recognized over a weighted average period of approximately two years. In connection with the pending merger with GENBAND, the Company accelerated the vesting of all outstanding stock options and certain outstanding RSAs, RSUs and PSUs. As a result, the Company expects to record incremental stock-based compensation expense in the fourth quarter of 2017 related to these accelerations. Upon consummation of the merger, the shares underlying the accelerated portion of the RSAs, RSUs and PSUs will be issued and the vesting schedules for the remaining unvested RSAs, RSUs and PSUs will be adjusted to reflect this acceleration. Option holders had an opportunity to exercise their stock options, including the accelerated stock options, from October 20, 2017 through October 24, 2017, after which date all remaining outstanding stock options, with certain exceptions, were canceled. |
MAJOR CUSTOMERS |
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Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
MAJOR CUSTOMERS | MAJOR CUSTOMERS The following customers contributed 10% or more of the Company's revenue in at least one of the three or nine month periods ended September 30, 2017 and 2016:
_______________________ * Represents less than 10% of revenue At September 30, 2017, two customers accounted for 10% or more of the Company's accounts receivable balance, representing approximately 30% of the Company's accounts receivable balance in the aggregate. At December 31, 2016, no customer accounted for 10% or more of the Company's accounts receivable balance. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. The Company maintains an allowance for doubtful accounts and such losses have been within management's expectations. |
GEOGRAPHIC INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GEOGRAPHIC INFORMATION | GEOGRAPHIC INFORMATION The Company's classification of revenue by geographic area is determined by the location to which the product is shipped or where the services are performed. The following table summarizes revenue by geographic area as a percentage of total revenue:
International revenue, both as a percentage of total revenue and absolute dollars, may vary from one period to the next, and accordingly, historical data may not be indicative of future periods. |
INCOME TAXES |
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Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company's income tax provisions for the nine months ended September 30, 2017 and 2016 reflect the Company's estimates of the effective rates expected to be applicable for the respective full years, adjusted for any discrete events, which are recorded in the period that they occur. These estimates are reevaluated each quarter based on the Company's estimated tax expense for the full year. The estimated effective rates for the nine months ended September 30, 2017 and 2016 do not include any benefit for the Company's domestic losses, as the Company has concluded that a valuation allowance on any domestic benefit is required. Included in the Company's provision for the nine months ended September 30, 2016 is a discrete charge of $0.7 million related to an uncertain tax position of the Company's subsidiary in France. |
COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES On July 19, 2017, Taqua Holdings, LLC ("Holdings") filed a lawsuit against the Company, GENBAND, Taqua and several of the Company's merger-related subsidiaries and GENBAND Holdings' merger-related holding companies (collectively, the "Holdings Lawsuit Defendants") in Texas state court, District of Dallas County (Case No. DC-17-08630) based on the parties' Earn-Out Agreement (the "Holdings Complaint") which expressly provides that the Company is to have "the absolute right and sole and absolute discretion to operate and otherwise make decisions with respect to the conduct of the Business." The lawsuit alleges that: (i) the Company purportedly breached the Earn-Out Agreement by implementing a restructuring plan, the Taqua Restructuring Initiative, that was allegedly intended to undermine Taqua's business and the Company's payment obligation; and (ii) the Company purportedly acquired Taqua for the purpose of eliminating Taqua as a competitor before the Company's pending merger with GENBAND (the "GENBAND Merger"), and that the Company never intended to promote Taqua products. The Holdings Complaint purported to seek monetary damages for the Company's alleged breach of the Earn-Out Agreement (which is described in Note 2 of this Quarterly Report on Form 10-Q and a copy of which is filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 2016) and an injunction of both the Taqua Restructuring Initiative and the GENBAND Merger. On August 17, 2017, Holdings filed a Motion for Expedited Discovery. On August 18, 2017, the Company filed its Answer and Motion to Compel Arbitration and Stay Proceedings, requesting the Texas state court stay the proceedings in favor of arbitration, as provided by the terms of the Earn-Out Agreement. On August 22, 2017, Holdings filed its Opposition to the Company's Motion to Compel Arbitration and Stay Proceedings. Also on August 22, 2017, the Company filed its Response to Holdings' Motion for Expedited Discovery. On August 24, 2017, the Company filed a Reply in Support of its Motion to Compel Arbitration and Stay Proceedings. On August 25, 2017, a hearing was held on: (i) Holdings' Motion for Expedited Discovery and (ii) the Company's Motion to Compel Arbitration and Stay Proceedings. On August 29, 2017, the Texas state court denied Holdings' Motion for Expedited Discovery and granted the Company's Motion to Compel Arbitration and Stay Proceedings. Therefore, as of August 29, 2017, this lawsuit is stayed until further order of the court. Pursuant to the Membership Interest Purchase Agreement between the parties, dated September 26, 2016, the Company and Holdings have initiated non-binding mediation in an attempt to resolve this dispute. The Company does not expect the results of this suit to have a material adverse effect on its business or consolidated financial statements. The Company is fully cooperating with an SEC inquiry regarding the development and issuance of the Company's first quarter 2015 revenue and earnings guidance. Based on recent communications with the SEC's Division of Enforcement (the "Staff"), the Company currently expects the Staff to seek approval of the SEC commissioners to initiate proceedings alleging securities law violations, including violations of Section 10(b) and 17(a) of the Exchange Act with respect to the development and issuance of the Company's first quarter 2015 revenue and earnings guidance which the Staff believes, based on its assessment of the matter, would warrant a $3.1 million fine against the Company. The Company believes the allegations are without merit and intends to vigorously contest the matter and the Staff's view. The Company recorded $1.6 million in the three months ended September 30, 2017 for potential fines in connection with this investigation. In addition, the Company is often a party to disputes and legal proceedings that it considers routine and incidental to its business. Management does not expect the results of any of these actions to have a material effect on the Company's business or consolidated financial statements. |
SUBSEQUENT EVENTS |
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Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On October 26, 2017, the Company held the Special Stockholders' Meeting, at which the Company's stockholders voted to, among other things, adopt the Merger Agreement. The Company expects that the Mergers will be consummated on Friday, October 27, 2017. On October 23, 2017, in connection with the pending merger with GENBAND, the Company committed to a restructuring initiative to reduce its post-transaction workforce by approximately 350 people, or approximately 15%, of combined Sonus and GENBAND employees worldwide. Cash expenditures of approximately $10 million to $12 million are anticipated to be incurred for severance and related costs. The actions are expected to be substantially completed by the end of 2018. Annual cash savings of approximately $45 million are anticipated as a result of this restructuring initiative. |
BASIS OF PRESENTATION (Policies) |
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Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring items, necessary for their fair presentation with accounting principles generally accepted in the United States of America ("GAAP") and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Interim results are not necessarily indicative of results for a full year or any future interim period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2016 (the "Annual Report"), which was filed with the SEC on February 27, 2017. |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of Sonus and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. |
Use of Estimates and Judgments | Use of Estimates and Judgments The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and judgments relied upon in preparing these consolidated financial statements include accounting for business combinations, revenue recognition for multiple element arrangements, inventory valuations, assumptions used to determine the fair value of stock-based compensation, intangible assets and goodwill valuations, including impairments, legal contingencies and recoverability of Sonus' net deferred tax assets and the related valuation allowances. Sonus regularly assesses these estimates and records changes in estimates in the period in which they become known. Sonus bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of the Company's financial instruments, which include cash equivalents, marketable securities, investments, accounts receivable, accounts payable and other long-term liabilities, approximate their fair values. |
Operating Segments | Operating Segments The Company operates in a single segment. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance. To date, the chief operating decision maker has made such decisions and assessed performance at the company level, as one segment. The Company's chief operating decision maker is its President and Chief Executive Officer. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Any forward-looking statements regarding the potential impact of recent accounting pronouncements do not include the potential impact of the pending merger with GENBAND. In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"), which amends the scope of modification accounting for share-based payment arrangements. ASU 2017-09 provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Accounting Standards Codification ("ASC") 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective for the Company beginning January 1, 2018 for both interim and annual reporting periods, with early adoption permitted. The Company does not expect the adoption of ASU 2017-09 will have a material impact on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test. As a result, under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, ASU 2017-04 clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units in connection with an entity's testing of reporting units for goodwill impairment; clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable; and makes minor changes to other related guidance within the ASC. ASU 2017-04 is effective prospectively for the Company beginning January 15, 2020, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company elected to early-adopt ASU 2017-04 as of January 1, 2017; such early adoption did not have a material impact on the Company's consolidated financial results. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16"), which removes the prohibition in ASC 740, Income Taxes, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. ASU 2016-16 is intended to reduce the complexity of GAAP and diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. ASU 2016-16 is effective for the Company beginning January 1, 2019 for both interim and annual reporting periods. The Company does not believe that the adoption of ASU 2016-16 will have a material impact on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"), which amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU 2016-15 is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. ASU 2016-15 adds or clarifies guidance on eight cash flow issues, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or certain other debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for the Company beginning January 1, 2018 for both interim and annual reporting periods, with early adoption permitted. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. The Company does not expect the adoption of ASU 2016-15 will have a material impact on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which adds an impairment model that is based on expected losses rather than incurred losses. Under ASU 2016-13, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 is effective for the Company beginning January 1, 2020 for both interim and annual reporting periods, with early adoption permitted. The Company does not expect the adoption of ASU 2016-13 will have a material impact on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 became effective for the Company beginning January 1, 2017 for both interim and annual reporting periods. Under ASU 2016-09, the Company will now recognize unrealized excess tax benefits. Due to the Company's full valuation allowance on its federal and state income taxes, the adoption of ASU 2016-09 did not have a material impact on the Company's accounting for income taxes. Without the valuation allowance, the Company would have recognized an increased deferred tax asset approximating $5 million. The Company has elected to continue to apply forfeiture rates to its expense attribution related to stock options, restricted stock awards and restricted stock units, as the Company believes that such continued application results in more accurate expense attribution over the life of these equity grants. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) Section A - Leases: Amendments to the FASB Accounting Standards Codification ("ASU 2016-02"), its new standard on accounting for leases. ASU 2016-02 introduces a lessee model that brings most leases onto the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB's new revenue recognition standard (i.e., those related to evaluating when profit can be recognized). Furthermore, ASU 2016-02 addresses other concerns related to the current leases model. For example, ASU 2016-02 eliminates the current GAAP requirement for an entity to use bright-line tests in determining lease classification. ASU 2016-02 is effective for the Company for both interim and annual periods beginning January 1, 2019. Upon adoption of ASU 2016-02, the Company will recognize lease obligations for the right to use these assets in connection with its existing lease agreements. The Company is currently assessing the potential impact of the adoption of ASU 2016-02 on its consolidated financial statements and accordingly, such amounts to be recognized in the balance sheet have yet to be determined. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory ("ASU 2015-11"), which simplifies the measurement of inventory by requiring entities to measure most inventory at the lower of cost and net realizable value, replacing the previous requirement to measure most inventory at the lower of cost or market. ASU 2015-11 does not apply to inventories that are measured by using either the last-in, first-out method or the retail inventory method. ASU 2015-11 became effective for the Company for both interim and annual reporting periods beginning January 1, 2017. The adoption of ASU 2015-11 did not have a material impact on the Company's consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), its final standard on revenue from contracts with customers, along with additional ASUs which, among other things, clarified the implementation of the new revenue guidance and delayed the adoption by one year, to January 1, 2018 (collectively, the "New Revenue Standard"). The New Revenue Standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue model to contracts within its scope, an entity identifies the contract(s) with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to the performance obligations in the contract and recognizes revenue when (or as) the entity satisfies a performance obligation. The New Revenue Standard applies to all contracts with customers that are within the scope of other topics in the ASC. Certain of the New Revenue Standard's provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities (i.e., property, plant and equipment; real estate; or intangible assets). Existing accounting guidance applicable to these transfers has been amended or superseded. The Company continues to assess the potential impact of the adoption of the New Revenue Standard on its consolidated financial statements, and currently believes that such adoption will, in general, accelerate the recognition of revenue (i.e., more revenue will be recognized upon delivery than is currently recognized ratably or upon payment) compared to the current standards in effect, in particular, sales of software-only products and sales to customers currently accounted for on a cash basis. The Company currently expects to adopt the New Revenue Standard using the modified retrospective option, and is in the process of updating its revenue recognition software to comply with the New Revenue Standard. Under the modified retrospective method, the Company will apply the New Revenue Standard to all contracts not yet completed as of January 1, 2018, recognizing in beginning Accumulated deficit an adjustment for the cumulative effect of the change and providing additional disclosures comparing results to those as if the Company were still following the previous accounting standards. The Company currently expects that the adjustment to Accumulated deficit will be approximately $1 million. |
BUSINESS ACQUISITION (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | A summary of the final allocation of the purchase consideration for Taqua is as follows (in thousands):
The Company's acquisition-related expense for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):
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EARNINGS (LOSS) PER SHARE (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of calculations of shares used to compute basic and diluted earnings (loss) per share | The calculations of shares used to compute basic and diluted earnings (loss) per share are as follows (in thousands):
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CASH EQUIVALENTS AND INVESTMENTS (Tables) |
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Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of amortized cost, gross unrealized gains and losses and fair value of marketable debt and equity securities and investments | The amortized cost, gross unrealized gains and losses and fair value of the Company's marketable debt securities and investments at September 30, 2017 and December 31, 2016 were comprised of the following (in thousands):
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Schedule of fair value of financial assets | The following table shows the fair value of the Company's financial assets at September 30, 2017 and December 31, 2016. These financial assets are comprised of the Company's available-for-sale debt securities and reported under the captions Cash and cash equivalents, Marketable securities and Investments in the condensed consolidated balance sheets (in thousands):
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INVENTORY (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventory | Inventory at September 30, 2017 and December 31, 2016 consists of the following (in thousands):
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INTANGIBLE ASSETS AND GOODWILL (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets | The Company's intangible assets at September 30, 2017 and December 31, 2016 consist of the following (dollars in thousands):
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Schedule of amortization expense related to intangible assets | Amortization expense for intangible assets for the three and nine months ended September 30, 2017 and 2016 was as follows (in thousands):
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Schedule of estimated future amortization expense for intangible assets | Estimated future amortization expense for the Company's intangible assets at September 30, 2017 is as follows (in thousands):
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Schedule of goodwill | The changes in the carrying value of the Company's goodwill in the nine months ended September 30, 2017 were as follows (in thousands):
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ACCRUED EXPENSES (Tables) |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued expenses | Accrued expenses at September 30, 2017 and December 31, 2016 consist of the following (in thousands):
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RESTRUCTURING ACCRUAL (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of restructuring accrual activity | A summary of the Taqua Restructuring Initiative accrual activity for the nine months ended September 30, 2017 is as follows (in thousands):
A summary of the 2015 Restructuring Initiative accrual activity for the nine months ended September 30, 2017 is as follows (in thousands):
A summary of the 2016 Restructuring Initiative accrual activity for the nine months ended September 30, 2017 is as follows (in thousands):
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STOCK-BASED COMPENSATION PLANS (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of activity related to outstanding stock options | The activity related to the Company's outstanding stock options for the nine months ended September 30, 2017 is as follows:
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Schedule of assumptions used to estimate the fair value of options at the date of grant using the Black-Scholes option pricing model | The grant date fair values of options to purchase common stock granted in the three and nine months ended September 30, 2017 were estimated using the Black-Scholes valuation model with the following assumptions:
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Schedule of stock options, additional information | Additional information regarding the Company's stock options for the three and nine months ended September 30, 2017 is as follows:
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Schedule of activity related to unvested restricted stock grants | The activity related to the Company's RSAs for the nine months ended September 30, 2017 is as follows:
The activity related to the Company's RSUs for the nine months ended September 30, 2017 is as follows:
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Schedule of activity related to performance stock awards | The activity related to the Company's PSUs for the nine months ended September 30, 2017 is as follows:
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Schedule of stock-based compensation expenses which are included in condensed consolidated statement of operations | The condensed consolidated statements of operations include stock-based compensation for the three and nine months ended September 30, 2017 and 2016 as follows (in thousands):
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MAJOR CUSTOMERS (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||
Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of customers contributing 10% or more of the revenue | The following customers contributed 10% or more of the Company's revenue in at least one of the three or nine month periods ended September 30, 2017 and 2016:
_______________________ * Represents less than 10% of revenue |
GEOGRAPHIC INFORMATION (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of revenue by geographic area as a percentage of total revenue | The Company's classification of revenue by geographic area is determined by the location to which the product is shipped or where the services are performed. The following table summarizes revenue by geographic area as a percentage of total revenue:
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BUSINESS ACQUISITION - Summary of Taquq LLC Acquisition (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||||
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Sep. 26, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Business Acquisition [Line Items] | |||||||
Cash, net of cash acquired | $ 0 | $ 20,669 | |||||
Current assets | $ 3,347 | ||||||
Goodwill | $ 49,891 | $ 52,136 | 49,891 | 52,136 | $ 49,393 | $ 40,310 | |
Taqua, LLC [Member] | |||||||
Business Acquisition [Line Items] | |||||||
Cash, net of cash acquired | 19,919 | ||||||
Property and equipment | 1,478 | ||||||
Goodwill | 9,581 | ||||||
Other noncurrent assets | 23 | ||||||
Current liabilities | (5,435) | ||||||
Long-term liabilities | (685) | ||||||
Total Assets and Liabilities, Net | 19,919 | ||||||
Professional and services fees | $ 1,543 | $ 951 | $ 6,278 | $ 951 | |||
Developed technology [Member] | Taqua, LLC [Member] | |||||||
Business Acquisition [Line Items] | |||||||
Intangible assets | 2,100 | ||||||
Customer Relationships [Member] | Taqua, LLC [Member] | |||||||
Business Acquisition [Line Items] | |||||||
Intangible assets | $ 9,510 |
EARNINGS (LOSS) PER SHARE - (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Reconciliation of weighted average shares outstanding from basic to diluted | ||||
Weighted average shares outstanding - basic | 49,753 | 49,402 | 49,472 | 49,436 |
Potential dilutive common shares | 378 | 0 | 0 | 0 |
Weighted average shares outstanding - diluted | 50,131 | 49,402 | 49,472 | 49,436 |
Common stock and unvested shares of restricted stock not included because their effect would have been antidilutive (in shares) | 5,200 | 8,200 | 7,400 | 8,200 |
CASH EQUIVALENTS AND INVESTMENTS - Narrative (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Dec. 31, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Schedule of Available-for-sale Securities [Line Items] | |||
Available-for-sale securities sold | $ 3,800,000 | ||
Available-for-sale securities, gross realized gains (losses) | $ (18,000) | ||
Period considered to classify available-for-sale securities as investments | 1 year | ||
Minimum [Member] | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Period considered to classify available-for-sale securities as investments | 1 year | ||
Maximum [Member] | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Period considered to classify available-for-sale securities as investments | 2 years | ||
Scenario, Forecast [Member] | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Available-for-sale securities sold | $ 50,000,000 | ||
Available-for-sale securities, gross realized gains (losses) | $ (60,000) |
INVENTORY - (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Inventory Disclosure [Abstract] | ||
On-hand final assemblies and finished goods inventories | $ 14,465 | $ 15,346 |
Deferred cost of goods sold | 3,317 | 4,237 |
Gross inventory | 17,782 | 19,583 |
Less current portion | (16,282) | (18,283) |
Inventory, Noncurrent | $ 1,500 | $ 1,300 |
INTANGIBLE ASSETS AND GOODWILL - (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Intangible Assets And Goodwill | |||||
Weighted average amortization period (years) | 6 years 2 months 22 days | 6 years 2 months 22 days | |||
Cost | $ 55,250 | $ 55,250 | $ 55,250 | ||
Accumulated amortization | 31,898 | 31,898 | 25,053 | ||
Net carrying value | 23,352 | 23,352 | $ 30,197 | ||
Amortization expense | 2,293 | $ 1,774 | 6,845 | $ 5,493 | |
Estimated future amortization expense for intangible assets | |||||
Remainder of 2017 | 2,293 | 2,293 | |||
2018 | 6,615 | 6,615 | |||
2019 | 5,608 | 5,608 | |||
2020 | 4,166 | 4,166 | |||
2021 | 2,395 | 2,395 | |||
Thereafter | 2,275 | 2,275 | |||
Total | 23,352 | $ 23,352 | |||
Developed technology [Member] | |||||
Intangible Assets And Goodwill | |||||
Weighted average amortization period (years) | 6 years 6 months 15 days | 6 years 6 months 15 days | |||
Cost | 34,980 | $ 34,980 | $ 34,980 | ||
Accumulated amortization | 21,222 | 21,222 | 16,453 | ||
Net carrying value | 13,758 | 13,758 | $ 18,527 | ||
Amortization expense | 1,602 | 1,455 | $ 4,769 | 4,537 | |
Customer Relationships [Member] | |||||
Intangible Assets And Goodwill | |||||
Weighted average amortization period (years) | 5 years 9 months 12 days | 5 years 9 months 12 days | |||
Cost | 19,540 | $ 19,540 | $ 19,540 | ||
Accumulated amortization | 9,946 | 9,946 | 7,870 | ||
Net carrying value | 9,594 | 9,594 | $ 11,670 | ||
Amortization expense | 691 | $ 319 | $ 2,076 | $ 956 | |
Internal use software [Member] | |||||
Intangible Assets And Goodwill | |||||
Weighted average amortization period (years) | 3 years | 3 years | |||
Cost | 730 | $ 730 | $ 730 | ||
Accumulated amortization | 730 | 730 | 730 | ||
Net carrying value | $ 0 | $ 0 | $ 0 |
INTANGIBLE ASSETS AND GOODWILL - (Details 2) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||||
---|---|---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Sep. 26, 2016 |
Dec. 31, 2015 |
|
Goodwill [Roll Forward] | |||||||
Goodwill | $ 52,997 | $ 52,499 | $ 55,242 | $ 43,416 | |||
Accumulated impairment losses | (3,106) | (3,106) | (3,106) | (3,106) | |||
Goodwill, beginning of period | $ 52,136 | $ 49,891 | $ 49,891 | $ 49,393 | $ 52,136 | $ 40,310 | |
Acquisition | 11,826 | ||||||
Goodwill, end of period | $ 52,136 | 49,891 | |||||
Taqua, LLC [Member] | |||||||
Goodwill [Roll Forward] | |||||||
Goodwill, beginning of period | $ 9,581 | ||||||
Acquisition | $ 498 |
ACCRUED EXPENSES - (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Payables and Accruals [Abstract] | ||
Employee compensation and related costs | $ 14,941 | $ 15,879 |
Other | 8,830 | 10,007 |
Total | $ 23,771 | $ 25,886 |
COMMON STOCK REPURCHASES (Details) - USD ($) |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Jul. 29, 2013 |
|
Class of Stock [Line Items] | |||
Payments for repurchase of common stock | $ 0 | $ 7,130,000 | |
Stock repurchased and retired during period (in shares) | 0 | 900,000 | |
Remaining authorized repurchase amount | $ 5,400,000 | ||
Common Stock [Member] | |||
Class of Stock [Line Items] | |||
Stock buyback program authorized amount | $ 100,000,000 | ||
Stock Buyback Program [Member] | |||
Class of Stock [Line Items] | |||
Payments for repurchase of common stock | $ 7,100,000 |
MAJOR CUSTOMERS - (Details) - customer |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Revenue [Member] | Less than [Member] | |||||
MAJOR CUSTOMERS | |||||
Threshold percentage | 10.00% | ||||
Revenue [Member] | Customer [Member] | Verizon Communications[Member] | |||||
MAJOR CUSTOMERS | |||||
Concentration risk, percentage | 16.00% | 15.00% | |||
Revenue [Member] | Customer [Member] | AT&T [Member] | |||||
MAJOR CUSTOMERS | |||||
Concentration risk, percentage | 11.00% | 12.00% | 10.00% | 13.00% | |
Accounts receivable balance [Member] | |||||
MAJOR CUSTOMERS | |||||
Threshold percentage | 10.00% | ||||
Accounts receivable balance [Member] | Customer [Member] | |||||
MAJOR CUSTOMERS | |||||
Concentration risk, percentage | 30.00% | ||||
Number of major customers | 2 | 2 | 0 |
GEOGRAPHIC INFORMATION - Summary of Revenue by Geographic Area as a Percentage of Total Revenue (Details) - Revenue [Member] - Geographical area [Member] |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Revenue by geographic area and by customer | ||||
Percentage of total revenue | 100.00% | 100.00% | 100.00% | 100.00% |
United States [Member] | ||||
Revenue by geographic area and by customer | ||||
Percentage of total revenue | 75.00% | 70.00% | 71.00% | 69.00% |
Europe, Middle East and Africa [Member] | ||||
Revenue by geographic area and by customer | ||||
Percentage of total revenue | 8.00% | 14.00% | 11.00% | 13.00% |
Japan [Member] | ||||
Revenue by geographic area and by customer | ||||
Percentage of total revenue | 10.00% | 7.00% | 11.00% | 10.00% |
Other Asia Pacific [Member] | ||||
Revenue by geographic area and by customer | ||||
Percentage of total revenue | 4.00% | 5.00% | 4.00% | 5.00% |
Other [Member] | ||||
Revenue by geographic area and by customer | ||||
Percentage of total revenue | 3.00% | 4.00% | 3.00% | 3.00% |
INCOME TAXES - (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Discrete charge related to an uncertain tax position | $ 0.7 |
COMMITMENTS AND CONTINGENCIES (Details) - Case No. DC - 17 - 08630 [Member] $ in Millions |
3 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Loss Contingencies [Line Items] | |
Estimate of fine | $ 3.1 |
Loss in Period | $ 1.6 |
SUBSEQUENT EVENTS (Details) - Subsequent Event [Member] $ in Millions |
Oct. 23, 2017
USD ($)
position
|
---|---|
Subsequent Event [Line Items] | |
Number of positions eliminated | position | 350 |
Number of positions eliminated, percent | 15.00% |
Expected annual savings | $ 45 |
Minimum [Member] | |
Subsequent Event [Line Items] | |
Expected restructuring expense | 10 |
Maximum [Member] | |
Subsequent Event [Line Items] | |
Expected restructuring expense | $ 12 |
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