Attached files

file filename
8-K - 8-K - Sonus, Inc.a11-25706_48k.htm

Exhibit 99.1

 

GRAPHIC

 

SONUS NETWORKS REPORTS 2011 THIRD QUARTER RESULTS

 

Westford, MA, October 27, 2011Sonus Networks, Inc. (Nasdaq: SONS), a market leader in next generation IP-based network solutions, today announced results for the quarter ended September 30, 2011 and provided its outlook for the quarter and year ending December 31, 2011.

 

Third Quarter Highlights

 

·                  Total revenue was $66.4 million

·                  SBC product revenue was $10.4 million, compared to $7.7 million in the second quarter of fiscal 2011 and $3.1 million in the third quarter of fiscal 2010

·                  Sonus added eight new customers in the quarter, all of whom purchased SBC products and services

 

Revenue for the third quarter of fiscal 2011 was $66.4 million, compared to $51.8 million in the second quarter of fiscal 2011 and $42.7 million in the third quarter of fiscal 2010.  GAAP net income for the third quarter of fiscal 2011 was $1.9 million, or $0.01 per diluted share, compared to a net loss of $5.9 million, or $0.02 per share, in the second quarter of 2011 and a net loss of $22.3 million, or $0.08 per share, in the third quarter of 2010.  Non-GAAP net income for the third quarter of fiscal 2011 was $4.1 million, or $0.01 per diluted share, compared to a net loss of $3.6 million, or $0.01 per share, for the second quarter of fiscal 2011 and a net loss of $14.3 million, or $0.05 per share, for the third quarter of fiscal 2010.

 

“Sonus is leveraging its rich history as a market leading IP networking company into faster growth areas including the session border controller market,” said Ray Dolan, President and Chief Executive Officer.  “Solid SBC momentum this quarter with our revenue and new customers are good indicators of the progress we are making.  We look forward to reporting on our success in the coming quarters as we continue to reposition our business for higher growth opportunities.”

 

1



 

Fourth Quarter and Fiscal 2011 Outlook

 

The Company’s outlook is based on current indications for its business, which may change during the current quarter.  A reconciliation of the GAAP to non-GAAP outlook and a statement on the use of non-GAAP financial measures are included at the end of this press release.  For the fourth quarter and fiscal 2011, management provides the following outlook:

 

·                  Total company revenue of $70 million to $74 million for the fourth quarter and $255 million to $259 million for the full year

·                  SBC product revenue of $17 million to $20 million for the fourth quarter and $37 million to $40 million for the full year

·                  GAAP gross margins between 62% and 63% for the fourth quarter and between 55% and 56% for the full year

·                  Non-GAAP gross margins between 63% and 64% for the fourth quarter and between 56% and 57% for the full year

·                  GAAP operating expenses between $41.5 million and $43 million for the fourth quarter and between $158 million and $159 million for the full year

·                  Non-GAAP operating expenses between $39.5 million and $41 million for the fourth quarter and between $151 million and $152 million for the full year

·                  GAAP earnings per share between $0.00 and $0.02 for the fourth quarter and GAAP loss per share between $0.04 and $0.06 for the full year

·                  Non-GAAP earnings per share between $0.01 and $0.03 for the fourth quarter and non-GAAP loss per share between $0.01 and $0.03 for the full year

·                  Year-end cash and investments of approximately $385 million

 

“While the fundamentals and prospects for our business are improving, this revised fourth quarter financial outlook reflects a more cautious capital spending environment by our customers,” said Moe Castonguay, Chief Financial Officer.

 

Earnings Conference Call Details:

 

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

 

To listen live via telephone:

Dial-in number: 800-931-6361
International Callers: +1 212-231-2929

 

2



 

To listen via internet:

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

 

Replay information

 

A telephone playback of the call will be available following the conference and can be accessed by calling 800-633-8284, or for international callers, +1 402-977-9140.  The reservation number for the replay is 21542478 and will be available until November 10, 2011.

 

Non-GAAP Financial Measures

 

Sonus Networks presents its financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”).  Many of our investors have requested that we disclose non-GAAP information because it is useful in understanding our ongoing performance and comparing it to our historical results, as our non-GAAP financial measures exclude certain non-cash and one-time charges or benefits.  Likewise, we use non-GAAP measures that exclude certain expenses, such as stock-based compensation expense, amortization of intangible assets and restructuring charges, in analyzing and assessing the overall performance of our business, making operating decisions, planning and forecasting future periods, and determining payments under compensation programs.  We exclude stock-based compensation expense and amortization of intangible assets because these charges are non-cash in nature.  We exclude restructuring charges because they are one-time events.  No adjustment to income taxes for non-GAAP items is required, as we were unable to recognize a tax benefit on domestic losses incurred in any of the periods presented.  We believe that non-GAAP financial measures, including gross profit, gross margin, operating expenses, net income (loss) and earnings (loss) per share, are useful when evaluating our ongoing operations and comparing them to our historical results, including our liquidity.

 

Whenever we use a non-GAAP financial measure, we provide a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure.  Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.

 

Our non-GAAP financial measures are not presented in accordance with, nor are they intended to be a substitute for, GAAP financial measures.  In addition, our presentations of

 

3



 

these measures may not be comparable to similarly titled measures used by other companies.  Our non-GAAP financial measures should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP.  Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as analytical tools.  In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

 

###

 

About Sonus Networks

 

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

 

Important Information Regarding Forward-Looking Statements

 

This release may contain forward-looking statements (within the meaning of the Private Securities Litigation Reform Act) regarding future events that involve risks and uncertainties.  Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “outlook,” and “expectations” and similar references to future periods.  Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results.  Such forward-looking statements may relate to, among others, expected financial and operating results, expected growth rates, future stock-based compensation and amortization expenses, future business prospects and market conditions.  Such forward-looking statements do not constitute guarantees of future performance and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those anticipated. These include, but are not limited to: the timing of the Company’s recognition of revenues; the ability to recruit and retain key personnel; difficulties supporting our new strategic focus on channel sales; difficulties expanding the Company’s customer base; difficulties leveraging market opportunities; difficulties providing solutions that meet the needs of customers; market acceptance of the Company’s products and services; rapid technological and market change; the ability to protect intellectual property rights; the ability to maintain partner, reseller, distribution and vendor support and supply relationships; higher risks in international operations and markets; the ability to hire and retain employees; the impact of increased competition; currency fluctuations; litigation; changes in the market price of the Company’s common stock; actions taken by significant stockholders; failure or circumvention of the Company’s controls and procedures; and other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission by the Company, including in Item 1A - “Risk Factors” of our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q.  Any forward-looking statements represent Sonus’ views only as of today and should not be relied upon as representing Sonus’ views as of any subsequent date.  While Sonus may

 

4



 

elect to update forward-looking statements at some point, Sonus specifically disclaims any obligation to do so, except as required by law.

 

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

 

For more information, please contact:

 

Patti Leahy
978-614-8440
pleahy@sonusnet.com      

 

5



 

SONUS NETWORKS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three months ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

 

 

2011

 

2011

 

2010

 

Revenue:

 

 

 

 

 

 

 

Product

 

$

41,892

 

$

29,446

 

$

19,391

 

Service

 

24,461

 

22,326

 

23,348

 

Total revenue

 

66,353

 

51,772

 

42,739

 

 

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 

Product

 

11,504

 

9,618

 

7,231

 

Service

 

12,633

 

12,218

 

11,730

 

Total cost of revenue

 

24,137

 

21,836

 

18,961

 

 

 

 

 

 

 

 

 

Gross profit

 

42,216

 

29,936

 

23,778

 

 

 

 

 

 

 

 

 

Gross profit %

 

 

 

 

 

 

 

Product

 

72.5

%

67.3

%

62.7

%

Service

 

48.4

%

45.3

%

49.8

%

Total gross profit %

 

63.6

%

57.8

%

55.6

%

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

16,231

 

15,187

 

16,226

 

Sales and marketing

 

14,651

 

13,298

 

11,836

 

General and administrative

 

10,133

 

8,197

 

17,157

 

Restructuring

 

 

 

1,114

 

Total operating expenses

 

41,015

 

36,682

 

46,333

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

1,201

 

(6,746

)

(22,555

)

Interest income, net

 

269

 

332

 

429

 

Other income, net

 

 

 

1

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

1,470

 

(6,414

)

(22,125

)

Income tax benefit (provision)

 

439

 

480

 

(153

)

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,909

 

$

(5,934

)

$

(22,278

)

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

Basic

 

$

0.01

 

$

(0.02

)

$

(0.08

)

Diluted

 

$

0.01

 

$

(0.02

)

$

(0.08

)

 

 

 

 

 

 

 

 

Shares used to compute earnings (loss) per share:

 

 

 

 

 

 

 

Basic

 

278,721

 

278,400

 

275,412

 

Diluted

 

279,324

 

278,400

 

275,412

 

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

 

 

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2011

 

2010

 

Revenue:

 

 

 

 

 

Product

 

$

107,291

 

$

92,465

 

Service

 

78,133

 

73,863

 

Total revenue

 

185,424

 

166,328

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

Product

 

44,283

 

30,358

 

Service

 

42,364

 

35,501

 

Total cost of revenue

 

86,647

 

65,859

 

 

 

 

 

 

 

Gross profit

 

98,777

 

100,469

 

 

 

 

 

 

 

Gross profit %

 

 

 

 

 

Product

 

58.7

%

67.2

%

Service

 

45.8

%

51.9

%

Total gross profit %

 

53.3

%

60.4

%

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Research and development

 

47,026

 

46,272

 

Sales and marketing

 

42,246

 

37,822

 

General and administrative

 

26,526

 

38,272

 

Restructuring

 

 

1,114

 

Total operating expenses

 

115,798

 

123,480

 

 

 

 

 

 

 

Loss from operations

 

(17,021

)

(23,011

)

Interest income, net

 

1,036

 

1,367

 

Other income, net

 

 

12

 

 

 

 

 

 

 

Loss before income taxes

 

(15,985

)

(21,632

)

Income tax provision

 

(448

)

(469

)

 

 

 

 

 

 

Net loss

 

$

(16,433

)

$

(22,101

)

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

Basic

 

$

(0.06

)

$

(0.08

)

Diluted

 

$

(0.06

)

$

(0.08

)

 

 

 

 

 

 

Shares used to compute loss per share:

 

 

 

 

 

Basic

 

278,286

 

275,107

 

Diluted

 

278,286

 

275,107

 

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2011

 

2010

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

76,272

 

$

62,501

 

Marketable securities

 

249,822

 

258,831

 

Accounts receivable, net

 

44,279

 

52,813

 

Inventory

 

20,886

 

22,499

 

Deferred income taxes

 

434

 

408

 

Other current assets

 

13,765

 

16,474

 

Total current assets

 

405,458

 

413,526

 

 

 

 

 

 

 

Property and equipment, net

 

22,921

 

21,284

 

Intangible assets, net

 

1,300

 

1,600

 

Goodwill

 

5,062

 

5,062

 

Investments

 

52,585

 

87,087

 

Deferred income taxes

 

1,336

 

1,271

 

Other assets

 

5,372

 

26,124

 

 

 

$

494,034

 

$

555,954

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

9,426

 

$

16,936

 

Accrued expenses

 

17,107

 

29,999

 

Current portion of deferred revenue

 

41,897

 

42,776

 

Current portion of long-term liabilities

 

664

 

338

 

Total current liabilities

 

69,094

 

90,049

 

 

 

 

 

 

 

Deferred revenue

 

10,323

 

42,811

 

Long-term liabilities

 

4,126

 

4,138

 

Total liabilities

 

83,543

 

136,998

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders equity:

 

 

 

 

 

Common stock

 

279

 

277

 

Additional paid-in capital

 

1,308,715

 

1,301,285

 

Accumulated deficit

 

(905,934

)

(889,501

)

Accumulated other comprehensive income

 

7,431

 

6,895

 

Total stockholders’ equity

 

410,491

 

418,956

 

 

 

$

494,034

 

$

555,954

 

 



 

SONUS NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2011

 

2010

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(16,433

)

$

(22,101

)

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

 

 

 

 

 

Depreciation and amortization of property and equipment

 

8,721

 

8,134

 

Amortization of intangible assets

 

300

 

413

 

Stock-based compensation

 

6,308

 

12,410

 

Loss on disposal of property and equipment

 

14

 

81

 

Deferred income taxes

 

 

60

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

8,762

 

13,471

 

Inventory

 

19,113

 

(10,360

)

Other operating assets

 

9,763

 

1,484

 

Accounts payable

 

(7,234

)

12,704

 

Accrued expenses

 

(12,046

)

4,477

 

Deferred revenue

 

(33,477

)

(8,347

)

Net cash (used in) provided by operating activities

 

(16,209

)

12,426

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(10,962

)

(9,193

)

Purchase of intangible assets

 

 

(2,000

)

Purchases of marketable securities

 

(152,402

)

(283,461

)

Sale/maturities of marketable securities

 

192,769

 

236,698

 

Net cash provided by (used in) investing activities

 

29,405

 

(57,956

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

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

 

1,513

 

1,353

 

Proceeds from exercise of stock options

 

818

 

327

 

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

 

(1,245

)

(572

)

Principal payments of capital lease obligations

 

(66

)

(194

)

Net cash provided by financing activities

 

1,020

 

914

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(445

)

538

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

13,771

 

(44,078

)

Cash and cash equivalents, beginning of year

 

62,501

 

125,323

 

Cash and cash equivalents, end of period

 

$

76,272

 

$

81,245

 

 



 

SONUS NETWORKS, INC.

Supplemental Information

(In thousands)

(unaudited)

 

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

 

 

 

Three months ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

 

 

2011

 

2011

 

2010

 

Stock-based compensation

 

 

 

 

 

 

 

Cost of revenue - product

 

$

100

 

$

109

 

$

105

 

Cost of revenue - service

 

258

 

389

 

396

 

Cost of revenue

 

358

 

498

 

501

 

 

 

 

 

 

 

 

 

Research and development expense

 

505

 

527

 

617

 

Sales and marketing expense

 

408

 

563

 

647

 

General and administrative expense

 

796

 

627

 

4,947

 

Operating expense

 

1,709

 

1,717

 

6,211

 

 

 

 

 

 

 

 

 

Total stock-based compensation

 

$

2,067

 

$

2,215

 

$

6,712

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

 

 

 

Cost of revenue - product

 

$

 

$

 

$

37

 

Research and development

 

100

 

100

 

100

 

Total amortization of intangible assets

 

$

100

 

$

100

 

$

137

 

 

 

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2011

 

2010

 

Stock-based compensation

 

 

 

 

 

Cost of revenue - product

 

$

317

 

$

265

 

Cost of revenue - service

 

1,032

 

1,219

 

Cost of revenue

 

1,349

 

1,484

 

 

 

 

 

 

 

Research and development expense

 

1,565

 

1,888

 

Sales and marketing expense

 

1,468

 

2,064

 

General and administrative expense

 

1,926

 

6,974

 

Operating expense

 

4,959

 

10,926

 

 

 

 

 

 

 

Total stock-based compensation

 

$

6,308

 

$

12,410

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

 

Cost of revenue - product

 

$

 

$

113

 

Research and development

 

300

 

300

 

Total amortization of intangible assets

 

$

300

 

$

413

 

 



 

SONUS NETWORKS, INC.

Reconciliation Between GAAP and Non-GAAP Financial Measures

(In thousands, except percentages and per share amounts)

(unaudited)

 

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

 

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

 

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

 

 

 

 

 

Three months ended

 

 

 

 

 

September 30,

 

June 30,

 

September 30,

 

 

 

Notes

 

2011

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

GAAP Gross profit

 

 

 

$

42,216

 

$

29,936

 

$

23,778

 

Stock-based compensation expense

 

A

 

358

 

498

 

501

 

Amortization of intangible assets

 

B

 

 

 

37

 

Non-GAAP Gross profit

 

 

 

$

42,574

 

$

30,434

 

$

24,316

 

 

 

 

 

 

 

 

 

 

 

GAAP Gross margin

 

 

 

63.6

%

57.8

%

55.6

%

Stock-based compensation expense

 

A

 

0.6

%

1.0

%

1.2

%

Amortization of intangible assets

 

B

 

0.0

%

0.0

%

0.1

%

Non-GAAP Gross margin

 

 

 

64.2

%

58.8

%

56.9

%

 

 

 

 

 

 

 

 

 

 

GAAP Operating expenses

 

 

 

$

41,015

 

$

36,682

 

$

46,333

 

Stock-based compensation expense

 

A

 

(1,709

)

(1,717

)

(6,211

)

Amortization of intangible assets

 

B

 

(100

)

(100

)

(100

)

Restructuring

 

C

 

 

 

(1,114

)

Non-GAAP Operating expenses

 

 

 

$

39,206

 

$

34,865

 

$

38,908

 

 

 

 

 

 

 

 

 

 

 

GAAP Net income (loss)

 

 

 

$

1,909

 

$

(5,934

)

$

(22,278

)

Stock-based compensation expense

 

A

 

2,067

 

2,215

 

6,712

 

Amortization of intangible assets

 

B

 

100

 

100

 

137

 

Restructuring

 

C

 

 

 

1,114

 

Non-GAAP Net income (loss)

 

 

 

$

4,076

 

$

(3,619

)

$

(14,315

)

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share *

 

 

 

 

 

 

 

 

 

GAAP Earnings (loss) per share *

 

 

 

$

0.01

 

$

(0.02

)

$

(0.08

)

Non-GAAP Earnings (loss) per share *

 

 

 

$

0.01

 

$

(0.01

)

$

(0.05

)

 

 

 

 

 

 

 

 

 

 

Shares used to compute earnings (loss) per share *

 

 

 

 

 

 

 

 

 

Shares used to compute diluted earnings per share *

 

 

 

279,324

 

N/A

 

N/A

 

Shares used to compute loss per share *

 

 

 

N/A

 

278,400

 

275,412

 

 


*  In periods of net income, diluted earnings per share is presented.

 



 

SONUS NETWORKS, INC.

Reconciliation Between GAAP and Non-GAAP Financial Measures

(In thousands, except percentages and per share amounts)

(unaudited)

 

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

 

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

 

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

 

 

 

 

 

Nine months ended

 

 

 

 

 

September 30,

 

September 30,

 

 

 

Notes

 

2011

 

2010

 

 

 

 

 

 

 

 

 

GAAP Gross profit

 

 

 

$

98,777

 

$

100,469

 

Stock-based compensation expense

 

A

 

1,349

 

1,484

 

Amortization of intangible assets

 

B

 

 

113

 

Non-GAAP gross profit

 

 

 

$

100,126

 

$

102,066

 

 

 

 

 

 

 

 

 

GAAP Gross margin

 

 

 

53.3

%

60.4

%

Stock-based compensation expense

 

A

 

0.7

%

0.9

%

Amortization of intangible assets

 

B

 

0.0

%

0.1

%

Non-GAAP Gross margin

 

 

 

54.0

%

61.4

%

 

 

 

 

 

 

 

 

GAAP Operating expenses

 

 

 

$

115,798

 

$

123,480

 

Stock-based compensation expense

 

A

 

(4,959

)

(10,926

)

Amortization of intangible assets

 

B

 

(300

)

(300

)

Restructuring

 

C

 

 

(1,114

)

Non-GAAP Operating expenses

 

 

 

$

110,539

 

$

111,140

 

 

 

 

 

 

 

 

 

GAAP Net loss

 

 

 

$

(16,433

)

$

(22,101

)

Stock-based compensation expense

 

A

 

6,308

 

12,410

 

Amortization of intangible assets

 

B

 

300

 

413

 

Restructuring

 

C

 

 

1,114

 

Non-GAAP Net loss

 

 

 

$

(9,825

)

$

(8,164

)

 

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

 

 

GAAP loss per share

 

 

 

$

(0.06

)

$

(0.08

)

Non-GAAP loss per share

 

 

 

$

(0.04

)

$

(0.03

)

 

 

 

 

 

 

 

 

Shares used to compute loss per share

 

 

 

278,286

 

275,107

 

 



 

SONUS NETWORKS, INC.

Reconciliation Between GAAP and Non-GAAP Financial Measures

(In millions, except percentages and per share amounts)

(unaudited)

 

The following tables include non-GAAP measures provided as outlook for the three months and year ended December 31, 2011 derived from our GAAP (accounting principles generally accepted in the United States) 2011outlook.  This non-GAAP outlook for gross margin, operating expenses and earnings (loss) per share is not presented in accordance with, nor is it intended to be a substitute for, GAAP.  In addition, our presentations of these measures may not be comparable to similarly titled measures used by other companies.  The non-GAAP measures provided as outlook should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP.

 

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

 

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

 

 

 

 

 

Three months ended

 

Year ended

 

 

 

 

 

December 31, 2011

 

December 31, 2011

 

 

 

Notes

 

Range

 

Range

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

$

70

 

$

74

 

$

255

 

$

259

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

 

 

 

 

 

 

 

 

 

GAAP outlook

 

 

 

62

%

63

%

55

%

56

%

Stock-based compensation

 

A

 

1

%

1

%

1

%

1

%

Non-GAAP outlook

 

 

 

63

%

64

%

56

%

57

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

GAAP outlook

 

 

 

$

41.5

 

$

43.0

 

$

158.0

 

$

159.0

 

Stock-based compensation

 

A

 

(1.9

)

(1.9

)

(6.6

)

(6.6

)

Amortization of intangible assets

 

B

 

(0.1

)

(0.1

)

(0.4

)

(0.4

)

Non-GAAP outlook

 

 

 

$

39.5

 

$

41.0

 

$

151.0

 

$

152.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share

 

 

 

 

 

 

 

 

 

 

 

GAAP outlook

 

 

 

$

 

$

0.02

 

$

(0.04

)

$

(0.06

)

Stock-based compensation expense

 

A

 

0.01

 

0.01

 

0.03

 

0.03

 

Amortization of intangible assets

 

B

 

 

 

 

 

Non-GAAP outlook

 

 

 

$

0.01

 

$

0.03

 

$

(0.01

)

$

(0.03

)

 



 

SONUS NETWORKS, INC.

Notes to Reconciliation Between GAAP and Non-GAAP Financial Measures

(unaudited)

 

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

 

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

 

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

 

We believe that excluding the non-cash amortization of intangible assets facilitates the comparison of our financial results to our historical operating results and to other companies in our industry and provides meaningful information regarding our liquidity.

 

C               We recorded restructuring expense for a headcount reduction initiative related to the closing of our office in Ottawa, Canada, which reduced our workforce by 12 employees.  We believe that excluding these restructuring expenses facilitates the comparison of our financial results to our historical operating results and to other companies in our industry and provides meaningful information regarding our liquidity.