MVNR.9.30.2014.10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
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ý | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2014 OR
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¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 001-36171 |
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| Mavenir Systems, Inc. (Exact name of registrant as specified in its charter) | |
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Delaware | | 61-1489105 |
(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) |
1700 International Parkway, Suite 200Richardson, TX 75081
(Address of principal executive offices)
Telephone Number (469) 916-4393
(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ý No ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | | ¨ | | Accelerated filer | | ¨ |
Non-accelerated filer | | x (Do not check if a smaller reporting company) | | Smaller reporting company | | ¨ |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý |
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As of October 24, 2014, there were approximately 28,855,211 shares of the Registrant’s Common Stock outstanding. |
Mavenir Systems, Inc.
FORM 10-Q
September 30, 2014
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Mavenir Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts) |
| | | | | | | |
| September 30, 2014 | | December 31, 2013 |
| (unaudited) | | (as adjusted, see Note 1) |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 64,367 |
| | $ | 38,930 |
|
Accounts receivable, net of allowance of $253 and $587 at September 30, 2014 and December 31, 2013, respectively | 33,831 |
| | 23,641 |
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Unbilled revenue | 14,713 |
| | 11,213 |
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Inventories | 2,924 |
| | 7,109 |
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Prepaid expenses and other current assets | 2,335 |
| | 3,614 |
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Deferred contract costs | 5,098 |
| | 9,313 |
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Total current assets | 123,268 |
| | 93,820 |
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Non-current assets: | | | |
Property and equipment, net | 6,278 |
| | 5,054 |
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Intangible assets, net | 4,350 |
| | 5,202 |
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Deposits and other assets | 1,865 |
| | 1,657 |
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Deferred tax assets | 1,136 |
| | — |
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Goodwill | 832 |
| | 866 |
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Total assets | $ | 137,729 |
| | $ | 106,599 |
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Liabilities and shareholders’ equity: | | | |
Current liabilities: | | | |
Trade accounts payable | $ | 7,571 |
| | $ | 7,152 |
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Accrued liabilities | 13,122 |
| | 11,939 |
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Deferred revenue | 11,487 |
| | 15,785 |
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Income tax payable | 466 |
| | 765 |
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Current portion of long-term debt | 3,125 |
| | — |
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Total current liabilities | 35,771 |
| | 35,641 |
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Non-current liabilities: | | | |
Uncertain tax positions | 2,932 |
| | 3,153 |
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Other long-term liabilities | 416 |
| | 351 |
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Long-term debt | 21,809 |
| | 23,423 |
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Total liabilities | 60,928 |
| | 62,568 |
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Commitments and contingencies |
| |
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Shareholders’ equity: | | | |
Common stock, $0.001 par value. 300,000,000 shares authorized; 28,854,603 and 23,420,759 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively | 28 |
| | 23 |
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Additional paid-in capital | 200,964 |
| | 155,198 |
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Accumulated deficit | (125,928 | ) | | (112,187 | ) |
Accumulated other comprehensive income | 1,737 |
| | 997 |
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Total shareholders’ equity | 76,801 |
| | 44,031 |
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Total liabilities and shareholders’ equity | $ | 137,729 |
| | $ | 106,599 |
|
See Notes to Condensed Consolidated Financial Statements
Mavenir Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
(unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Revenues | | | | | | | |
Software products | $ | 27,311 |
| | $ | 20,788 |
| | $ | 77,503 |
| | $ | 58,052 |
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Maintenance | 6,741 |
| | 5,183 |
| | 18,565 |
| | 16,109 |
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| 34,052 |
| | 25,971 |
| | 96,068 |
| | 74,161 |
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Cost of revenues | | | | | | | |
Software products | 12,393 |
| | 10,806 |
| | 34,258 |
| | 28,220 |
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Maintenance | 3,677 |
| | 2,716 |
| | 9,364 |
| | 5,543 |
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| 16,070 |
| | 13,522 |
| | 43,622 |
| | 33,763 |
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Gross profit | 17,982 |
| | 12,449 |
| | 52,446 |
| | 40,398 |
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Operating expenses: | | | | | | | |
Research and development | 7,958 |
| | 5,436 |
| | 21,281 |
| | 16,934 |
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Sales and marketing | 8,124 |
| | 4,675 |
| | 23,223 |
| | 14,331 |
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General and administrative | 5,737 |
| | 5,745 |
| | 16,231 |
| | 15,106 |
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Total operating expenses | 21,819 |
| | 15,856 |
| | 60,735 |
| | 46,371 |
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Operating loss | (3,837 | ) | | (3,407 | ) | | (8,289 | ) | | (5,973 | ) |
Other expense (income): | | | | | | | |
Interest and other income | (26 | ) | | (4 | ) | | (87 | ) | | (12 | ) |
Interest and other expense | 430 |
| | 1,072 |
| | 1,638 |
| | 2,187 |
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Loss on early extinguishment of debt | — |
| | — |
| | 1,783 |
| | — |
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Foreign exchange loss (gain) | 2,221 |
| | (316 | ) | | 2,275 |
| | 2,328 |
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Total other expense (income), net | 2,625 |
| | 752 |
| | 5,609 |
| | 4,503 |
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Loss before income tax | (6,462 | ) | | (4,159 | ) | | (13,898 | ) | | (10,476 | ) |
Income tax (benefit) expense | (657 | ) | | 354 |
| | (157 | ) | | 1,972 |
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Net loss | $ | (5,805 | ) | | $ | (4,513 | ) | | $ | (13,741 | ) | | $ | (12,448 | ) |
Other comprehensive income (loss) | | | | | | | |
Foreign currency translation adjustments | 779 |
| | 52 |
| | 740 |
| | (50 | ) |
Total comprehensive loss | $ | (5,026 | ) | | $ | (4,461 | ) | | $ | (13,001 | ) | | $ | (12,498 | ) |
Net loss per common share: | | | | | | | |
Basic | $ | (0.21 | ) | | $ | (3.35 | ) | | $ | (0.55 | ) | | $ | (9.28 | ) |
Diluted | $ | (0.21 | ) | | $ | (3.35 | ) | | $ | (0.55 | ) | | $ | (9.28 | ) |
Weighted-average common shares outstanding: | | | | | | | |
Basic and diluted | 27,392 |
| | 1,348 |
| | 25,012 |
| | 1,342 |
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See Notes to Condensed Consolidated Financial Statements
Mavenir Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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| | | | | | | |
| Nine Months Ended September 30, |
| 2014 | | 2013 |
Operating activities: | | | |
Net loss | $ | (13,741 | ) | | $ | (12,448 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Depreciation of property and equipment | 2,442 |
| | 1,769 |
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Amortization of intangible assets | 1,504 |
| | 1,080 |
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Amortization of debt discount | 115 |
| | 216 |
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Provision for bad debt | (302 | ) | | 388 |
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Stock-based compensation expense | 3,071 |
| | 1,161 |
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Unrealized foreign currency loss | 1,073 |
| | 663 |
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Loss on early extinguishment of debt | 1,783 |
| | — |
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Changes in operating assets and liabilities: | | | |
Accounts receivable | (10,420 | ) | | (1,686 | ) |
Unbilled revenue | (3,641 | ) | | 925 |
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Deposits and other current assets | (1,919 | ) | | (465 | ) |
Inventories | 4,185 |
| | (2,592 | ) |
Prepaid expenses | 1,487 |
| | (527 | ) |
Deferred contract costs | 4,125 |
| | (1,399 | ) |
Deferred revenue | (4,180 | ) | | (3,325 | ) |
Accounts payable and accrued liabilities | 1,447 |
| | (738 | ) |
Net cash used in operating activities | (12,971 | ) | | (16,978 | ) |
Investing activities: | | | |
Purchases of property and equipment | (4,334 | ) | | (1,962 | ) |
Net cash used in investing activities | (4,334 | ) | | (1,962 | ) |
Financing activities: | | | |
Proceeds from follow-on public offering, net of offering costs | 41,686 |
| | — |
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Borrowings from long-term debt | 25,000 |
| | 15,000 |
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Borrowings from line of credit | — |
| | 12,000 |
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Repayments of long-term debt | (15,000 | ) | | — |
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Repayments of line of credit borrowing | (10,000 | ) | | (7,000 | ) |
Exercise of options and warrants to purchase common stock | 1,014 |
| | 17 |
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Net cash provided by financing activities | 42,700 |
| | 20,017 |
|
Effect of foreign currency exchange rate changes on cash and cash equivalents | 42 |
| | (511 | ) |
Net increase in cash and cash equivalents | 25,437 |
| | 566 |
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Cash and cash equivalents at beginning of period | 38,930 |
| | 7,402 |
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Cash and cash equivalents at end of period | $ | 64,367 |
| | $ | 7,968 |
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Supplemental cash flow information: | | | |
Cash paid for interest | $ | 1,454 |
| | $ | 1,627 |
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Income tax payments, net | $ | 707 |
| | $ | 254 |
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See Notes to Condensed Consolidated Financial Statements
Mavenir Systems, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Description of the Business and Basis of Presentation
Throughout these condensed consolidated financial statements, Mavenir Systems, Inc. is referred to as “Mavenir,” the “Company,” “we,” “us” and “our.”
Description of Business
Mavenir was originally formed as a limited liability company on April 26, 2005. We were incorporated under the laws of Texas in August 2005, and subsequently incorporated under the laws of Delaware in March 2006.
We are a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver internet protocol (IP)-based voice, video, rich communication and enhanced messaging services to their subscribers globally. Our solutions deliver Rich Communication Suite (“RCS”)-based services, which enable enhanced mobile communications such as group text messaging, multi-party voice or video calling and live video streaming as well as the exchange of files or images, over existing 2G and 3G networks as well as next generation 4G Long Term Evolution (“LTE”) networks. Our solutions also deliver voice services over LTE technology and wireless (“Wi-Fi”) networks known respectively as Voice over LTE (“VoLTE”) and Voice over Wi-Fi (“VoWi-Fi”).
We are headquartered in Richardson, Texas, and have research and development personnel located at our wholly-owned subsidiaries in China and India. Additionally, we have a sales and operations presence in the Asia Pacific (“APAC”) and the Europe, Middle East and Africa (“EMEA”) regions.
Basis of Presentation and Consolidation
The unaudited interim financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our consolidated financial position as of September 30, 2014, and our results of operations and cash flows for the three and nine months ended September 30, 2014 and 2013. We have omitted certain information and disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) pursuant to those rules and regulations, although we believe that the disclosures we have made are adequate to make the information presented not misleading. The results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014, or for any other future annual or interim periods. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the Securities and Exchange Commission on February 21, 2014.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year presentation. Specifically, the beginning balance of our uncertain tax positions presented in Note 10 is now presented gross, per Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes. There was no change to the presentation on the condensed consolidated balance sheet.
Use of Estimates
The preparation of our condensed consolidated 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 revenue and expenses during the reporting period. Actual results could differ from management’s estimates.
Revision of Prior Period Financial Statements and Out-of-Period Adjustment
During our review of the three months ended March 31, 2014, we identified a non-cash error that originated in prior periods. The error related to performance-based warrants issued to a channel partner in 2008, earned in 2011 and exercised in April of 2014. The achievement of the performance milestone occurred in 2011 and would have resulted in a reduction to revenue of $1.3 million in 2011. We assessed the materiality of this error in accordance with the SEC guidance on considering the effects of prior period misstatements based on an analysis of quantitative and qualitative factors. Based on this analysis, we determined that the error was immaterial to the prior reporting periods affected and, therefore, amendments of reports previously filed with the SEC were not required. However, we have concluded that correcting the error in our 2014 financial statements would materially impact our results for the quarter ended March 31, 2014 and the year ending December 31, 2014. Accordingly, we have reflected the correction of this prior period error in the period in which it originated and revised our consolidated balance sheet as of December 31, 2013, as presented in this Quarterly Report on Form 10-Q. In addition, a reduction to accumulated deficit will be reflected as an adjustment to the beginning balance for the earliest year presented in the financial statements included in our Annual Report on Form 10-K for the year ending December 31, 2014.
The effect of the immaterial correction on the consolidated balance sheet as of December 31, 2013 is as follows (in thousands):
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| | | | | | | | | | | |
| As Reported | | Correction | | As Revised |
Other shareholders’ equity | $ | 1,020 |
| | $ | — |
| | $ | 1,020 |
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Additional paid-in capital | 153,878 |
| | 1,320 |
| | 155,198 |
|
Accumulated deficit | (110,867 | ) | | (1,320 | ) | | $ | (112,187 | ) |
Total shareholders’ equity | $ | 44,031 |
| | $ | — |
| | $ | 44,031 |
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2. Summary of Significant Accounting Policies and New Accounting Pronouncements
Significant Accounting Policies
Our significant accounting policies and others are presented in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 21, 2014. The policies include significant estimates made by management using information available at the time the estimates are made. However, these estimates could change materially if different information or assumptions were used.
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2014-9, “Revenue from Contracts with Customers: Topic 606” (“ASU 2014-9”). ASU 2014-9 is intended to enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, improve disclosure to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized, and provide guidance for transactions that are not currently addressed comprehensively. The standard is effective for fiscal years beginning after December 15, 2016, and interim periods therein, and does not allow for early adoption. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. The Company has begun the evaluation of the impact that the standard will have on its consolidated financial statements but has not yet selected a transition method.
3. Fair Value Measurements
The accounting guidance for fair value measurements establishes a three-tier fair value hierarchy, categorizing the inputs used to measure fair value.
The hierarchy can be described as follows:
Level 1—Observable inputs, such as quoted prices in active markets,
Level 2—Inputs other than the quoted prices in active markets that are observable either directly or indirectly, or
Level 3—Unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.
This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. We evaluate transfers between levels at the end of each reporting period. There were no transfers of
assets or liabilities between Level 1 and Level 2 during the three and nine months ended September 30, 2014 and 2013 or for the year ended December 31, 2013.
Our financial instruments consist primarily of cash and cash equivalents, billed accounts receivable, accounts payable and debt. The carrying amounts of financial instruments, other than the debt instruments, are representative of their fair values due to their short maturities. Our debt agreements are considered level 2 instruments and bear interest at market rates and thus management believes their carrying amounts approximate fair value.
We do not have any other financial or non-financial assets or liabilities that would be characterized as Level 2 or Level 3 instruments.
4. Property and Equipment
Property and equipment consists of the following (in thousands):
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| | | | | | | | | |
| Estimated Useful Life | | September 30, 2014 | | December 31, 2013 |
Computer software | 3 years | | $ | 5,095 |
| | $ | 5,046 |
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Computer and lab equipment | 3 years | | 11,448 |
| | 8,917 |
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Other equipment | 2-5 years | | 2,546 |
| | 1,468 |
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Property and equipment, gross | | | 19,089 |
| | 15,431 |
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Less: accumulated depreciation and amortization | | | (12,811 | ) | | (10,377 | ) |
Property and equipment, net | | | $ | 6,278 |
| | $ | 5,054 |
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Depreciation expense of property and equipment totaled $0.8 million and $2.4 million for the three and nine months ended September 30, 2014, compared to $0.7 million and $1.8 million for the same periods in 2013.
5. Accrued Liabilities
The following table presents the detail of accrued liabilities as of the periods ending (in thousands):
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| | | | | | | |
| September 30, 2014 | | December 31, 2013 |
Accrued payroll | $ | 7,005 |
| | $ | 7,221 |
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Accrued expenses on contracts | 3,813 |
| | 1,446 |
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Accrued professional fees | 216 |
| | 136 |
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Other | 2,088 |
| | 3,136 |
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Total accrued liabilities | $ | 13,122 |
| | $ | 11,939 |
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6. Long-Term Debt
Long-term debt consists of the following (in thousands):
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| | | | | | | |
| September 30, 2014 | | December 31, 2013 |
Silicon Valley Bank senior loan | $ | 25,000 |
| | $ | — |
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Silicon Valley Bank subordinated loan | — |
| | 10,000 |
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Silver Lake Waterman subordinated loan | — |
| | 15,000 |
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Discount related to issuance of warrants | (66 | ) | | (1,577 | ) |
Total debt | 24,934 |
| | 23,423 |
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Less: current portion | 3,125 |
| | — |
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Long-term portion | $ | 21,809 |
| | $ | 23,423 |
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Silicon Valley Bank Subordinated and Senior Loans
On October 18, 2012, we entered into loan agreements with Silicon Valley Bank (“SVB”). Under the agreements, we obtained two loans totaling $32.5 million (the “Old SVB Loans”). In February 2013, we amended the Old SVB Loans to join certain of our subsidiaries, including our non-U.S. subsidiaries, as co-borrowers. We also amended our minimum tangible net worth covenant. The Old SVB Loans included a $22.5 million Senior Loan (“Senior Loan”) secured by substantially all of our assets, including intellectual property. The Senior Loan had a term of three years at a floating rate of 1% above the U.S. prime rate, subject to a minimum interest rate of 4.25%. Under the terms of the agreement, we could draw up to 80% of eligible trade receivables up to $15.0 million, with the remaining $7.5 million generally available for working capital and cash management purposes. We also obtained a $10.0 million Subordinated Loan, also secured by substantially all of our assets including intellectual property that had a three years term at a fixed rate of 11%. The Old SVB Loans were replaced by an amended and restated loan and security agreement (“Amended and Restated Agreement”) that we entered into with SVB on March 6, 2014, as discussed below.
On March 6, 2014, we entered into an Amended and Restated Agreement with SVB to replace our $22.5 million Senior Loan facility with SVB. The Amended and Restated Agreement includes a five-year term loan of $25.0 million (“Term Loan”), a $15.0 million secured revolving line of credit (“Revolver”) and a $5 million secured line for letters of credit, foreign exchange and cash management services. The Term Loan has an initial floating interest rate of 2.75% above the U.S. prime rate, subject to a minimum interest rate of 4.25% and is secured by substantially all of our assets, including intellectual property. At September 30, 2014, the interest rate was 6.0%. After the achievement of the one of the two performance triggers described in the following sentence, the interest rate will be reduced to 2.25% above the U.S. prime rate; after the achievement of the second performance trigger the interest rate will be further reduced to 1.75% above the U.S. prime rate. The performance triggers are the following: (i) our achievement, on a consolidated basis, of positive EBITDA (as defined in the loan agreement) for two consecutive fiscal quarters, and (ii) the completion of an equity offering resulting in net proceeds to the Company of at least $50 million. The Term Loan provides for monthly payments of interest only until April 1, 2015; thereafter we are required to repay the outstanding principal amount in 48 monthly installments. The Term Loan has a maturity of March 1, 2019. If we prepay the Term Loan within one year of the Amended and Restated Loan Agreement, we will have to pay a prepayment premium of $250,000; thereafter, the Term Loan may be prepaid without penalty.
Under the Revolver, we may draw up to 80% of eligible domestic trade receivables, 70% of eligible foreign trade receivables and 35% of eligible accrued but unbilled accounts up to a maximum of $15.0 million. The Revolver has a three-year term and bears interest at a floating interest rate of 1% above the U.S. prime rate, subject to a minimum interest rate of 4.25% and is secured by substantially all of our assets, including intellectual property. We are also required to pay an unused facility fee, monthly in arrears, of 0.25% per annum of the unused amount of the Revolver. The Revolver may be prepaid at any time without penalty. As of September 30, 2014, we had no borrowings outstanding on the Revolver and had $15.0 million available.
As of March 5, 2014, we had approximately $0.3 million in deferred costs and $0.2 million in debt discount related to the Old SVB Loans on our condensed consolidated balance sheet. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470, Debt (“ASC 470”), we recorded a $0.3 million loss on early extinguishment of debt related to the Amended and Restated Agreement.
The Amended and Restated Agreement contains certain restrictive covenants, and requires us to maintain a minimum liquidity ratio and other earnings related amounts as defined in the Amended and Restated Agreement. The Amended and Restated Agreement also contains usual and customary events of default, the occurrence of which may result in all outstanding amounts under the loan agreements becoming due and payable immediately, and they also impose an interest penalty of an additional 5% above the otherwise applicable interest rate at any time when an event of default is continuing. As of September 30, 2014, we were in compliance with all covenants under the Amended and Restated Agreement.
Silver Lake Waterman Growth Capital Loan
On March 5, 2014, we repaid the balance of our $15.0 million subordinated term loan (“Silver Lake Loan”) with Silver Lake Waterman Fund (“Silver Lake”) using funds from our initial public offering.
As of March 5, 2014, we had approximately $0.2 million in deferred costs and $1.3 million in debt discount related to the Silver Lake Loan on our condensed consolidated balance sheet. The entire $1.5 million was recognized during the nine months ended September 30, 2014, as a loss on early extinguishment of debt related to the payoff of the Silver Lake Loan on March 5, 2014.
7. Contingencies
Legal Proceedings
From time to time, we, our customers and our competitors are subject to various litigation and claims arising in the ordinary course of business. The software and communications infrastructure industries are characterized by frequent litigation and claims, including claims regarding patent and other intellectual property rights, claims for damages or indemnification for alleged breach under commercial supply or service contracts and claims regarding alleged improper hiring practices.
We are not aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or financial condition.
8. Stockholders’ Equity
Follow-on Public Offering
On August 6, 2014, we closed a follow-on public offering, in which we sold 4,090,000 shares of common stock at a price to the public of $11.00 per share, before underwriting discounts and commissions. We raised approximately $41.7 million in net proceeds after deducting underwriting discounts and commissions of approximately $2.5 million and other estimated offering costs of approximately $0.8 million.
Equity Compensation Plans
We have two stock option plans: the Amended and Restated 2005 Stock Plan (the “2005 Plan”), and the Amended and Restated 2013 Equity Incentive Plan (the “2013 Plan”). In January 2013, we terminated the 2005 Plan and provided that no further stock awards were to be granted under the 2005 Plan and adopted the 2013 Plan as a continuation of and successor to the 2005 Plan. Upon our initial public offering (“IPO”), all shares that were reserved under the 2005 Plan but not issued were assumed by the 2013 Plan. All outstanding stock awards under the 2005 Plan continue to be governed by the existing terms. Under the 2013 Plan, we have the ability to issue incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and/or performance shares. Additionally, the 2013 Plan provides for the grant of performance cash awards to employees, directors and consultants. Stock options are granted at a price per common share not less than the fair value at date of grant. Stock options granted to date generally vest over a four-year period with 25% vesting at the end of one year and the remaining vesting monthly thereafter. Stock options granted generally are exercisable up to 10 years from the date of grant.
At September 30, 2014, there were 1,088,349 common shares available for future grants under the 2013 Plan.
To determine the weighted-average fair value of stock options granted, we used the Black-Scholes option pricing model with the following weighted-average assumptions during the periods presented:
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| | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Expected dividend yield | — | % | | — | % | | — | % | | — | % |
Risk-free interest rate (U.S. Treasury) | 1.9 | % | | 1.7 | % | | 2.0 | % | | 1.7 | % |
Expected term | 6.3 years |
| | 6.0 years |
| | 6.3 years |
| | 6.0 years |
|
Expected volatility | 61.5 | % | | 57.0 | % | | 60.9 | % | | 57.0 | % |
The fair value of all the awards granted is amortized to expense on a straight-line basis over the requisite service periods, which are generally the vesting periods. We granted stock options with a weighted-average grant date fair value during the nine months ended September 30, 2014 of $9.33 per share.
The following table summarizes the stock option activity for the nine months ended September 30, 2014:
|
| | | | | | | | | | | | |
| Shares | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term | | Aggregate Intrinsic Value |
| | | | | (years) | | (in thousands) |
Outstanding as of January 1, 2014 | 3,287,272 |
| | $ | 3.86 |
| | | | |
Granted | 1,259,767 |
| | 16.02 |
| | | | |
Exercised | (498,109 | ) | | 1.89 |
| | | | |
Forfeited or expired | (178,441 | ) | | 11.31 |
| | | | |
Outstanding as of September 30, 2014 | 3,870,489 |
| | $ | 7.80 |
| | 7.5 | | $ | 22,943 |
|
Exercisable as of September 30, 2014 | 1,978,922 |
| | $ | 3.13 |
| | 6.0 | | $ | 19,149 |
|
The following table presents our share-based compensation resulting from equity awards that we recorded in our condensed consolidated statements of operations and comprehensive loss (in thousands):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Cost of revenues | $ | 221 |
| | $ | 131 |
| | $ | 431 |
| | $ | 131 |
|
Research and development | 218 |
| | 209 |
| | 536 |
| | 209 |
|
Sales and marketing | 285 |
| | 400 |
| | 692 |
| | 400 |
|
General and administrative | 633 |
| | 121 |
| | 1,412 |
| | 421 |
|
Total | $ | 1,357 |
| | $ | 861 |
| | $ | 3,071 |
| | $ | 1,161 |
|
Warrant Exercises
In March of 2014, we issued 44,340 shares of our common stock to SVB upon the exercise in full of a warrant held by SVB. The warrant gave SVB the right to purchase up to 64,286 shares of our common stock at $5.11 per share. The warrant was fully exercised on a “cashless” basis pursuant to the terms of the agreement with SVB.
In April 2014, we issued 555,034 shares of our common stock to Cisco Systems, Inc. (“Cisco”) upon the exercise in full of a warrant held by Cisco. The warrant gave Cisco the right to purchase up to 898,294 shares of our common stock at $6.6794 per share on the achievement of certain bookings milestones. The warrant was fully exercised on a “cashless” basis pursuant to the terms of the agreement with Cisco.
In May 2014, we issued 40,871 shares of our common stock to WestRiver Mezzanine Loans, LLC (“WestRiver”) upon the exercise in full of a warrant held by WestRiver. The warrant gave WestRiver the right to purchase up to 64,285 shares of our common stock at $5.11 per share. The warrant was fully exercised on a “cashless” basis pursuant to the terms of the agreement with WestRiver.
In June 2014, we issued 194,606 shares of our common stock to Silver Lake Waterman Fund, L.P. (“Silver Lake”) upon the exercise in full of a warrant held by Silver Lake. The warrant gave Silver Lake the right to purchase up to 194,694 shares of our common stock at $0.007 per share. The warrant was fully exercised on a “cashless” basis pursuant to the terms of the agreement with Silver Lake.
In June 2014, we issued 11,228 shares of our common stock to Comerica Ventures Incorporated (“Comerica”) upon the exercise in full of a warrant held by Comerica. The exercise price was $6.6794 per share, which resulted in proceeds of approximately $0.1 million.
9. Net Loss per Share
We calculate basic net loss per share by dividing net loss attributable for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted, net loss per share is computed by giving effect to all potential weighted-average diluted common stock, including options and warrants, using the treasury stock method.
The computation of basic and diluted net loss per share is as follows (in thousands, except per share amounts):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Net loss | $ | (5,805 | ) | | $ | (4,513 | ) | | $ | (13,741 | ) | | $ | (12,448 | ) |
Basic common shares: | | | | | | | |
Weighted-average number of shares outstanding | 27,392 |
| | 1,348 |
| | 25,012 |
| | 1,342 |
|
Diluted common shares: | | | | | | | |
Weighted-average shares used to compute diluted net loss per share | 27,392 |
| | 1,348 |
| | 25,012 |
| | 1,342 |
|
Net loss per share attributable to common stockholders: | | | | | | | |
Basic | $ | (0.21 | ) | | $ | (3.35 | ) | | $ | (0.55 | ) | | $ | (9.28 | ) |
Diluted | $ | (0.21 | ) | | $ | (3.35 | ) | | $ | (0.55 | ) | | $ | (9.28 | ) |
We excluded certain shares from the computation of diluted net loss per share because the effect of these shares would have been anti-dilutive:
|
| | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Convertible preferred stock | — |
| | 16,452,467 |
| | — |
| | 16,452,467 |
|
Stock options | 1,027,462 |
| | 2,042,036 |
| | 1,685,499 |
| | 1,919,410 |
|
Warrants | — |
| | 1,235,633 |
| | — |
| | 1,235,633 |
|
10. Income Taxes
We base our provision for income taxes in our interim condensed consolidated financial statements on estimated annual effective tax rates in the tax jurisdictions where we operate. We monitor the assumptions used in estimating the annual effective tax rate and make adjustments, if required, throughout the year. If actual results differ from the assumptions used in estimating our annual effective income tax rate, future income tax expense could be materially affected. For the three and nine months ended September 30, 2014, total income tax benefit is approximately $0.7 million and $0.2 million on a worldwide basis compared with total income tax expense of approximately $0.4 million and $2.0 million for the three and nine months ended September 30, 2013. The difference is due primarily to discrete items recognized in the current quarter related to foreign taxes and the benefit realized from changes in our uncertain tax positions as described below.
We apply a two-step process for the evaluation of uncertain income tax positions based on a “more likely than not” threshold to determine if a tax position will be sustained upon examination by the taxing authorities. The recognition threshold in step one permits the benefit from an uncertain position to be recognized only if it is more likely than not, or 50% assured that the tax position will be sustained upon examination by the taxing authorities. The measurement methodology in step two is based on “cumulative probability,” resulting in the recognition of the largest amount that is greater than 50% likely of being realized upon settlement with the taxing authority.
During the nine months ended September 30, 2014, we completed a review of certain of our internal accounts and pricing and determined that it has reduced tax exposures, on an overall basis, primarily related to the way we account for certain intercompany transactions relating to management fees, sales support services, research and development services, license fees, or other development costs. These services are offered to and received from various related companies resulting in payables and receivables which are disregarded for our GAAP financial reporting but are recognized for tax purposes in several jurisdictions. Therefore, the tax treatment of the intercompany transactions has been analyzed in each entity’s jurisdiction and exposures were identified and quantified by jurisdiction. The net effect of the adjustment is approximately $0.2 million and is recorded as a decrease to income tax expense in the nine months ended September 30, 2014.
The resulting balance of our uncertain tax positions is depicted in the table below, on a gross basis, as of September 30, 2014 (in thousands):
|
| | | |
Balance as of January 1, 2014 | $ | 4,207 |
|
Additions to unrecognized tax benefits taken during the period | — |
|
Additions to unrecognized tax benefits as a result of positions taken in prior periods | 2,189 |
|
Decrease in unrecognized tax benefits relating to settlements with taxing authorities | — |
|
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations | — |
|
Reduction to unrecognized tax benefits as a result of positions taken during the period | (2,302 | ) |
Balance as of September 30, 2014 | $ | 4,094 |
|
Total deferred tax assets of approximately $2.8 million were available for offset on identified uncertain tax positions. Additional interest and penalties of approximately $1.6 million are not reflected on the above roll forward are recorded as a component of the total liability for uncertain tax positions. The net impact of the deferred tax asset offsets and interest and penalties result in a net uncertain tax position liability of approximately $2.9 million on our balance sheet.
The Company believes that deferred tax assets in China and Canada related to net operating losses and tax credits, respectively, will more-likely-than-not be realized in the current and future years in these jurisdictions. An income tax benefit of approximately $1.1 million has been recognized during the quarter. The deferred tax assets in jurisdictions outside of China and Canada are not considered realizable on a more-likely-than-not basis and continue to be offset with a valuation allowance. We have not accrued a provision for income taxes on undistributed earnings of approximately $14.8 million of certain non-U.S. subsidiaries, as of September 30, 2014 since such earnings are considered to be reinvested indefinitely. If the earnings were distributed, we would be subject to U.S. federal income and foreign withholding taxes. Determination of an unrecognized deferred income tax liability with respect to such earnings is not practicable.
11. Segment and Geographic Information
Operating segments are defined as components of an enterprise in which separate financial information is available that is evaluated regularly by the chief operating decision makers, in deciding how to allocate resources and in assessing performance. Our chief operating decision-makers (i.e., our chief executive officer and his direct reports) review financial information presented on a condensed consolidated basis, accompanied by disaggregated information about revenues by geographic region for purposes of allocating resources and evaluating financial performance. We have concluded that we operate in one segment and have provided the required enterprise-wide disclosures.
Revenues by geographic area are based on the deployment site location of the end customers. The following tables present our revenues and long-lived assets by geographic region (in thousands):
Revenues
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Americas | $ | 16,215 |
| | $ | 15,678 |
| | $ | 49,526 |
| | $ | 37,041 |
|
EMEA | 12,242 |
| | 7,325 |
| | 34,039 |
| | 24,994 |
|
APAC | 5,595 |
| | 2,968 |
| | 12,503 |
| | 12,126 |
|
Total | $ | 34,052 |
| | $ | 25,971 |
| | $ | 96,068 |
| | $ | 74,161 |
|
Long-Lived Assets
|
| | | | | | | |
| September 30, 2014 | | December 31, 2013 |
Americas | $ | 9,081 |
| | $ | 8,475 |
|
EMEA | 1,482 |
| | 1,888 |
|
APAC | 897 |
| | 759 |
|
Total | $ | 11,460 |
| | $ | 11,122 |
|
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2013 (which we refer to as our 2013 Form 10-K).
Throughout our Management’s Discussion and Analysis (“MD&A”), we refer to Mavenir Systems, Inc. as “Mavenir,” the “Company,” “we,” “us” and “our.” Throughout our MD&A, where we provide discussion of the three and nine months ended September 30, 2014, and we provide data for the same period in the prior year, we refer to the prior period as “2013.”
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements.
Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Our forward-looking statements are based on the beliefs and assumptions of our management based on information currently available to management, and are not guarantees of future performance or development. All of our forward-looking statements are subject to risks, uncertainties and other important factors, some of which are outside our control, which could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” included under Part I, Item 1A of our 2013 Form 10-K and those risks discussed in other documents we file with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
We are a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver internet protocol (IP)-based voice, video, rich communications and enhanced messaging services to their subscribers globally. Our solutions deliver Rich Communication Services (RCS), which enable enhanced mobile communications, such as group text messaging, multi-party voice or video calling and live video streaming as well as the exchange of files or images, over existing 2G and 3G networks and next generation 4G Long Term Evolution (LTE) networks. Our solutions also deliver voice services over LTE technology and wireless (Wi-Fi) networks, known respectively as Voice over LTE (VoLTE) and Voice over Wi-Fi (VoWi-Fi). We enable mobile service providers to offer services that generate increased revenue and improve subscriber satisfaction and retention, while allowing them to improve time-to-market of new services and reduce network costs. Our mOne® Convergence Platform has enabled MetroPCS (now part of T-Mobile), a leading mobile service provider, to introduce the industry’s first live network deployment of VoLTE and the industry’s first live deployment of next-generation RCS 5.
We sell our solutions principally to wireless mobile service providers globally through our direct sales force or strategic third-party reseller partners. For the three and nine months ended September 30, 2014, 61% and 53% of our revenue came from outside of the United States and compared to 43% and 53% for the three and nine months ended September 30, 2013.
Revenue from our solutions is generated from the sale of software products and maintenance and support. Software products revenues consist of software licenses, hardware and professional services fees from software customizations, feature development and training for customers. Maintenance revenue includes support, annual software maintenance agreements and extended hardware warranty arrangements.
GAAP financial highlights for the three months ended September 30, 2014 include:
| |
• | For the three months ended September 30, 2014, we generated revenues of $34.1 million, representing growth of 31.1% over the same period in 2013. |
| |
• | Revenues from our Voice and Video product group increased by 136.3% for the three months ended September 30, 2014 compared to the same period in 2013. |
| |
• | We experienced revenue growth of 4.4% in the Americas region, 58.6% in the Asia-Pacific region and 77.3% in the Europe, Middle East and Africa region, for the three months ended September 30, 2014, compared to the same period in 2013. |
Non-GAAP financial highlights for the three months ended September 30, 2014 include:
| |
• | Non-GAAP gross profit increased to $18.5 million, or 54.3% of revenue, compared to $12.7 million, or 49.0% of revenue, over the same period in 2013. |
| |
• | Non-GAAP operating loss decreased to $1.1 million, compared to $1.5 million over the same period in 2013. |
| |
• | Non-GAAP net loss decreased to $0.8 million, from a loss of $2.9 million over the same period in 2013. |
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe that the assumptions and estimates associated with revenue recognition, income taxes and stock-based compensation have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. These policies are summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2013 Form 10-K.
Key Operating and Financial Performance Metrics
We monitor and evaluate the key operating and financial performance metrics noted below to help us establish our budgets, measure our business operating performance, assess trends and evaluate our performance as compared to that of our competitors. We discuss revenue, gross profit margin and operating results below under “Components of Operating Results.” We discuss cash and cash equivalents and cash flows from operations below under “Liquidity and Capital Resources.”
|
| | | | | | | | | | | | | | | |
| As of and for the Three Months Ended September 30, | | As of and for the Nine Months Ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
| (in thousands) |
Revenues | $ | 34,052 |
| | $ | 25,971 |
| | $ | 96,068 |
| | $ | 74,161 |
|
Gross profit margin | 52.8 | % | | 47.9 | % | | 54.6 | % | | 54.5 | % |
Operating loss | (3,837 | ) | | (3,407 | ) | | (8,289 | ) | | (5,973 | ) |
Cash and cash equivalents | 64,367 |
| | 7,968 |
| | 64,367 |
| | 7,968 |
|
Cash used in operations | (54 | ) | | (6,803 | ) | | (12,971 | ) | | (16,978 | ) |
Components of Operating Results
Revenue
Revenue from our solutions is generated from the sale of software products and maintenance and support. Software products revenues consist of software licenses, hardware and professional services fees from software customizations, feature development and training for customers. Maintenance revenue includes support, annual software maintenance agreements and extended hardware warranty arrangements.
We report two classifications of revenue:
| |
• | Software products revenue includes revenue arrangements that consist of tangible products with essential software elements, perpetual right-to-use (RTU) software licenses and sales of industry standard hardware. Software products revenue is supported by customer contracts that generally outline terms and conditions, including those that relate to acceptance of the product. Software products revenue also includes software customizations and feature development for individual customers and training of customers. |
| |
• | Maintenance revenue includes support, annual software maintenance agreements and extended hardware warranty arrangements. Revenue from these services is recognized ratably over the service delivery period. |
Cost of Revenue
Our cost of software products revenue consists of payroll-related costs of service personnel, third-party hardware and third-party software licenses and the shipping and installation costs to any of our customers. The costs associated with our RTU software licenses are expensed as incurred in operating costs under research and development.
Our cost of maintenance revenue includes salaries, employee benefits, stock-based compensation and other related expenses. Additionally, hardware and third-party software licenses and services are included.
Gross Profit and Gross Profit Margin
Gross profit is the calculation of total revenue minus total cost of revenue. Our gross profit margin is our gross profit expressed as a percentage of revenue. Our gross profit margin has been and will continue to be affected by a variety of factors, including the mix of customers and types of revenue, cost fluctuations and reduction activities, including technological changes. Additionally, changes in foreign exchange rates may impact gross profit and gross profit margin.
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Salaries and personnel costs are the most significant component of each of these expense categories.
Research and Development Expenses. Research and development expenses primarily consist of salaries and personnel costs for research and development employees, including stock-based compensation and bonuses. Additional expenses include costs related to development, quality assurance and testing of new software and enhancement of existing software, consulting, travel and other related overhead such as facility costs.
Additionally, we supplement our own research and development resources with third-party international and domestic subcontractors for software development, documentation, quality assurance and software support. We believe continuing to invest in research and development efforts is essential to maintaining our competitive position. We expect research and development expenses to increase in the foreseeable future as we continue to broaden our product portfolio.
Sales and Marketing Expenses. Sales and marketing expenses consist primarily of salaries and personnel costs for our sales and marketing employees, including stock-based compensation, commissions and bonuses. Additional expenses include attendance at trade shows, marketing programs, consulting, travel and other related overhead. We expect our sales and marketing expenses to increase in the foreseeable future as we further increase the number of our sales and marketing professionals as we continue our geographic expansion and continue to grow our business.
General and Administrative Expenses. General and administrative expenses primarily consist of salary and personnel costs for administration, finance and accounting, legal, information systems and human resources employees, including stock-based compensation and bonuses. Additional expenses include consulting and professional fees, travel, insurance and other corporate expenses and gain or loss on disposal of assets. Expenses related to the acquisition of Airwide Solutions, including the amortization of intangible assets relating to customer relationships and technology, are included.
Operating Results
Operating results are the result of subtracting our total operating expenses from our gross profits. We use operating results to analyze the profitability of our operations without the effects of non-operating income and expenses.
Stock-Based Compensation
We include stock-based compensation as part of cost of revenue and operating expenses in connection with the grant or modification of stock options and other equity awards to our independent directors, employees and consultants. We apply the fair value method in accordance with authoritative guidance for determining the cost of stock-based compensation. The total cost of the grant or modification is measured based on the estimated fair value of the award at the date of grant.
The following table presents our stock-based compensation expense resulting from stock options that we recorded in our condensed consolidated statement of operations and comprehensive loss for the periods presented (in thousands):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Cost of revenues | $ | 221 |
| | $ | 131 |
| | $ | 431 |
| | $ | 131 |
|
Research and development | 218 |
| | 209 |
| | 536 |
| | 209 |
|
Sales and marketing | 285 |
| | 400 |
| | 692 |
| | 400 |
|
General and administrative | 633 |
| | 121 |
| | 1,412 |
| | 421 |
|
Total | $ | 1,357 |
| | $ | 861 |
| | $ | 3,071 |
| | $ | 1,161 |
|
Net Interest Expense
Net interest expense consists of the difference between interest income and interest expense. Interest income represents interest received on our cash and cash equivalents. Interest expense is due to commercial loans. See “Liquidity and Capital Resources” elsewhere in this section.
Income Tax Expense
Income tax expense consists of U.S. federal, state and foreign income taxes. We are required to pay income taxes in certain states and foreign jurisdictions. Historically, we have not been required to pay U.S. federal income taxes due to our accumulated net operating losses. For the three and nine months ended September 30, 2014, we have net operating loss carryforwards available to be utilized in the U.S. and certain foreign jurisdictions against future taxable income.
Results of Operations
Three Months Ended September 30, 2014 and 2013
Revenues |
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | |
| | | % of Total | | | | % of Total | | Change |
| 2014 | | Revenue | | 2013 | | Revenue | | Amount | | % |
| (in thousands) |
Revenue by type: | | | | | | | | | | | |
Software products | $ | 27,311 |
| | 80.2 | % | | $ | 20,788 |
| | 80.0 | % | | $ | 6,523 |
| | 31.4 | % |
Maintenance | 6,741 |
| | 19.8 | % | | 5,183 |
| | 20.0 | % | | 1,558 |
| | 30.1 | % |
Total revenues | $ | 34,052 |
| | 100 | % | | $ | 25,971 |
| | 100 | % | | $ | 8,081 |
| | 31.1 | % |
Revenue by Geographic Area: | | | | | | | | | | | |
Americas | $ | 16,215 |
| | 47.6 | % | | $ | 15,537 |
| | 59.8 | % | | $ | 678 |
| | 4.4 | % |
EMEA | 12,242 |
| | 36.0 | % | | 6,906 |
| | 26.6 | % | | 5,336 |
| | 77.3 | % |
APAC | 5,595 |
| | 16.4 | % | | 3,528 |
| | 13.6 | % | | 2,067 |
| | 58.6 | % |
Total revenues | $ | 34,052 |
| | 100 | % | | $ | 25,971 |
| | 100 | % | | $ | 8,081 |
| | 31.1 | % |
Revenue by Product Group: | | | | | | | | | | | |
Voice and Video | $ | 23,464 |
| | 68.9 | % | | $ | 9,930 |
| | 38.2 | % | | $ | 13,534 |
| | 136.3 | % |
Enhanced Messaging | 10,588 |
| | 31.1 | % | | 16,041 |
| | 61.8 | % | | (5,453 | ) | | (34.0 | )% |
Total revenues | $ | 34,052 |
| | 100 | % | | $ | 25,971 |
| | 100 | % | | $ | 8,081 |
| | 31.1 | % |
Revenues increased by 31.1%, or $8.1 million, for the three months ended September 30, 2014, compared to the same period in the prior year. Our revenue growth was the result of the expansion of existing customer relationships, in particular additional sales opportunities for our solutions generated by successful product launches. Software products revenue grew $6.5 million, or 31.4%, to $27.3 million in the three months ended September 30, 2014 from $20.8 million for the same period in 2013. The increased revenues were primarily from additional customer contracts. Maintenance revenues increased by 30.1%, or $1.6 million for the three months ended September 30, 2014, compared to the same period in the prior year, primarily due to additional customer contracts, as well as extended support agreements with existing customers.
Total revenue from the Americas region grew by $0.7 million, or 4.4%, to $16.2 million for the three months ended September 30, 2014 from $15.5 million for same period in 2013. Revenues in the EMEA region increased $5.3 million, or 77.3%, to $12.2 million for the three months ended September 30, 2014 from $6.9 million for same period in 2013. Revenues in the APAC region increased $2.1 million, or 58.6%, to $5.6 million for the three months ended September 30, 2014 from $3.5 million for same period in 2013. Revenues in the Americas and EMEA regions increased due to expansion of solutions to existing customers, while the increase in the APAC region primarily resulted from a customer contract that was entered into during 2014.
Revenue from the Voice and Video product group grew by $13.5 million, or 136.3%, to $23.5 million for the three months ended September 30, 2014 from $9.9 million for same period in 2013. Revenues from Voice and Video products increased, as we generated additional sales opportunities for our next-generation solutions through successful product launches with existing customers and our existing customers rolled out our solutions to larger numbers of subscribers. Revenues from Enhanced Messaging products decreased by $5.5 million, or 34.0%, to $10.6 million for the three months ended September 30, 2014 from $16.0 million for same period in 2013. Revenues from Enhanced Messaging products decreased due to a slowing of some of our legacy products and due to the timing of revenue recognition.
Cost of Revenue and Gross Profit
|
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | |
| | | % of Related | | | | % of Related | | Change |
| 2014 | | Revenue | | 2013 | | Revenue | | Amount | | % |
| (in thousands) |
Cost of Revenue | | | | | | | | | | | |
Software products | $ | 12,393 |
| | 45.4 | % | | $ | 10,806 |
| | 52.0 | % | | $ | 1,587 |
| | 14.7 | % |
Maintenance | 3,677 |
| | 54.5 | % | | 2,716 |
| | 52.4 | % | | 961 |
| | 35.4 | % |
Total | $ | 16,070 |
| | 47.2 | % | | $ | 13,522 |
| | 52.1 | % | | $ | 2,548 |
| | 18.8 | % |
Gross Profit | | | | | | | | | | | |
Software products | $ | 14,918 |
| | 54.6 | % | | $ | 9,982 |
| | 48.0 | % | | $ | 4,936 |
| | 49.4 | % |
Maintenance | 3,064 |
| | 45.5 | % | | 2,467 |
| | 47.6 | % | | 597 |
| | 24.2 | % |
Total | $ | 17,982 |
| | 52.8 | % | | $ | 12,449 |
| | 47.9 | % | | $ | 5,533 |
| | 44.4 | % |
Our cost of revenue increased $2.5 million, or 18.8%, to $16.1 million for the three months ended September 30, 2014 from $13.5 million for the same period in 2013. Cost of revenue increased due to an increase in revenues, as well as increased operations personnel costs to expand and service new markets.
Total gross profit increased $5.5 million, or 44.4%, to $18.0 million for the three months ended September 30, 2014 from $12.4 million for same period in 2013. Gross profit margin increased to 52.8% for the three months ended September 30, 2014 from 47.9% for same period in 2013. The increase was primarily due to a shift from initial deployments, which generally have lower margins.
Operating Expenses
|
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | |
| | | % of Total Revenue | | | | % of Total Revenue | | Change |
| 2014 | | | 2013 | | | Amount | | % |
| (in thousands) |
Research and development | $ | 7,958 |
| | 23.4 | % | | $ | 5,436 |
| | 20.9 | % | | $ | 2,522 |
| | 46.4 | % |
Sales and marketing | 8,124 |
| | 23.9 | % | | 4,675 |
| | 18.0 | % | | 3,449 |
| | 73.8 | % |
General and administrative | 5,737 |
| | 16.8 | % | | 5,745 |
| | 22.1 | % | | (8 | ) | | (0.1 | )% |
Total | $ | 21,819 |
| | 64.1 | % | | $ | 15,856 |
| | 61.0 | % | | $ | 5,963 |
| | 37.6 | % |
Research and Development
Research and development expenses increased by $2.5 million, or 46.4%, for the three months ended September 30, 2014, compared to the same period in the prior year. Research and development expense increased as we added headcount to enhance existing products and develop future product capability and new customer solutions.
Sales and Marketing
Sales and marketing costs increased by $3.4 million for the three months ended September 30, 2014, compared to the same period in the prior year. The growth in sales and marketing expense was primarily due to an increase in personnel costs and related expense to further enhance direct selling opportunities and to support sales growth into additional geographic areas.
General and Administrative
General and administrative expenses was essentially unchanged at $5.7 million for the three months ended September 30, 2014, and the same period in the prior year.
Net Interest Expense
|
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | |
| | | % of Total | | | | % of Total | | Change |
| 2014 | | Revenue | | 2013 | | Revenue | | Amount | | % |
| (in thousands) |
Interest income | $ | (26 | ) | | (0.1 | )% | | $ | (4 | ) | | — | % | | $ | (22 | ) | | 550.0 | % |
Interest expense | 430 |
| | 1.3 | % | | 1,072 |
| | 4.1 | % | | (642 | ) | | (59.9 | )% |
Total net interest expense | $ | 404 |
| | 1.2 | % | | $ | 1,068 |
| | 4.1 | % | | $ | (664 | ) | | (62.2 | )% |
Net interest expense decreased by $0.7 million for the three months ended September 30, 2014, compared to the same period in the prior year. The decrease was attributable to lower average outstanding debt during the three months ended September 30, 2014, compared to the same period in 2013, as well as the amendment made to our debt facility in March 2014, which lowered the overall interest rate on our outstanding debt balances.
Foreign Exchange
Foreign exchange loss increased to $2.2 million for the three months ended September 30, 2014 compared to a $0.3 million gain for the same period in 2013. The change is due to changes in transactional currencies compared to the functional currencies during the respective periods.
Income Tax Expense
Income tax benefit was $0.7 million for the three months ended September 30, 2014 compared to income tax expense of $0.4 million for the same period in 2013. The decrease in income tax expense is related primarily to the release of valuation allowance against deferred tax assets, reduced foreign withholding taxes and a reduction in the FIN48 liability recorded in the three months ended September 30, 2014 .
Results of Operations
Nine Months Ended September 30, 2014 and 2013
Revenues
|
| | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| | | % of Total | | | | % of Total | | Change |
| 2014 | | Revenue | | 2013 | | Revenue | | Amount | | % |
| (in thousands) |
Revenue by type: | | | | | | | | | | | |
Software products | $ | 77,503 |
| | 80.7 | % | | $ | 58,052 |
| | 78.3 | % | | $ | 19,451 |
| | 33.5 | % |
Maintenance | 18,565 |
| | 19.3 | % | | 16,109 |
| | 21.7 | % | | 2,456 |
| | 15.2 | % |
Total revenues | $ | 96,068 |
| | 100 | % | | $ | 74,161 |
| | 100 | % | | $ | 21,907 |
| | 29.5 | % |
Revenue by Geographic Area: | | | | | | | | | | | |
Americas | $ | 49,526 |
| | 51.6 | % | | $ | 36,873 |
| | 49.8 | % | | $ | 12,653 |
| | 34.3 | % |
Europe, Middle East and Africa (“EMEA”) | 34,039 |
| | 35.4 | % | | 24,502 |
| | 33.0 | % | | 9,537 |
| | 38.9 | % |
Asia-Pacific (“APAC”) | 12,503 |
| | 13.0 | % | | 12,786 |
| | 17.2 | % | | (283 | ) | | (2.2 | )% |
Total revenues | $ | 96,068 |
| | 100 | % | | $ | 74,161 |
| | 100 | % | | $ | 21,907 |
| | 29.5 | % |
Revenue by Product Group: | | | | | | | | | | | |
Voice and Video | $ | 66,334 |
| | 69.0 | % | | $ | 24,770 |
| | 33.4 | % | | $ | 41,564 |
| | 167.8 | % |
Enhanced Messaging | 29,734 |
| | 31.0 | % | | 49,391 |
| | 66.6 | % | | (19,657 | ) | | (39.8 | )% |
Total revenues | $ | 96,068 |
| | 100 | % | | $ | 74,161 |
| | 100 | % | | $ | 21,907 |
| | 29.5 | % |
Revenues increased by 29.5%, or $21.9 million, for the nine months ended September 30, 2014, compared to the same period in the prior year. Our revenue growth was the result of the expansion of existing customer relationships, in particular additional sales opportunities for our solutions generated by successful product launches. Software products revenue grew $19.5 million, or 33.5%, to $77.5 million in the nine months ended September 30, 2014 from $58.1 million for the same period in 2013. The increased revenues were primarily from additional sales to new and existing customers. Software products revenues increased at a faster pace than maintenance revenues for the nine months ended September 30, 2014, compared to the same period in the prior year, as software sales precede maintenance revenues.
Total revenue from the Americas region grew by $12.7 million, or 34.3%, to $49.5 million for the nine months ended September 30, 2014 from $36.9 million for same period in 2013. Revenues in the EMEA region increased $9.5 million, or 38.9%, to $34.0 million for the nine months ended September 30, 2014 from $24.5 million for same period in 2013. Revenues in the APAC region decreased $0.3 million, or 2.2%, to $12.5 million for the nine months ended September 30, 2014 from $12.8 million for same period in 2013. Revenues in the EMEA and Americas regions increased due to strong sales of Voice and Video solutions in both markets. The decrease in the APAC region was primarily due to a large Enhanced Messaging contract recognized during the nine months ended September 30, 2013 that was not recurring in 2014. This decrease was substantially offset by additional new customer contracts.
Revenue from the Voice and Video product group grew by $41.6 million, or 167.8%, to $66.3 million for the nine months ended September 30, 2014 from $24.8 million for same period in 2013. Revenues from Voice and Video products increased as we generated additional sales of next-generation solutions to existing customers and our existing customers rolled out our solutions to larger numbers of subscribers. Revenues from Enhanced Messaging products decreased by $19.7 million, or 39.8%, to $29.7 million for the nine months ended September 30, 2014 from $49.4 million for same period in 2013. Revenues from Enhanced Messaging products decreased due to a large initial deployment in 2013 that we did not have in 2014.
Cost of Revenue and Gross Profit
|
| | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| | | % of Related | | | | % of Related | | Change |
| 2014 | | Revenue | | 2013 | | Revenue | | Amount | | % |
| (in thousands) |
Cost of Revenue | | | | | | | | | | | |
Software products | $ | 34,258 |
| | 44.2 | % | | $ | 28,220 |
| | 48.6 | % | | $ | 6,038 |
| | 21.4 | % |
Maintenance | 9,364 |
| | 50.4 | % | | 5,543 |
| | 34.4 | % | | 3,821 |
| | 68.9 | % |
Total | $ | 43,622 |
| | 45.4 | % | | $ | 33,763 |
| | 45.5 | % | | $ | 9,859 |
| | 29.2 | % |
Gross Profit | | | | | | | | | | | |
Software products | $ | 43,245 |
| | 55.8 | % | | $ | 29,832 |
| | 51.4 | % | | $ | 13,413 |
| | 45.0 | % |
Maintenance | 9,201 |
| | 49.6 | % | | 10,566 |
| | 65.6 | % | | (1,365 | ) | | (12.9 | )% |
Total | $ | 52,446 |
| | 54.6 | % | | $ | 40,398 |
| | 54.5 | % | | $ | 12,048 |
| | 29.8 | % |
Our cost of revenue increased $9.9 million, or 29.2%, to $43.6 million for the nine months ended September 30, 2014 from $33.8 million for the same period in 2013. Cost of revenue increased due to an increase in revenues, as well as increased operations personnel costs to expand into new markets.
Total gross profit increased $12.0 million, or 29.8%, to $52.4 million for the nine months ended September 30, 2014 from $40.4 million for same period in 2013. Gross profit margin remained essentially unchanged at 54.6% for the nine months ended September 30, 2014 from 54.5% for same period in 2013.
Operating Expenses
|
| | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| | | % of Total | | | | % of Total | | Change |
| 2014 | | Revenue | | 2013 | | Revenue | | Amount | | % |
| (in thousands) |
Research and development | $ | 21,281 |
| | 22.2 | % | | $ | 16,934 |
| | 22.8 | % | | $ | 4,347 |
| | 25.7 | % |
Sales and marketing | 23,223 |
| | 24.2 | % | | 14,331 |
| | 19.3 | % | | 8,892 |
| | 62.0 | % |
General and administrative | 16,231 |
| | 16.9 | % | | 15,106 |
| | 20.4 | % | | 1,125 |
| | 7.4 | % |
Total | $ | 60,735 |
| | 63.3 | % | | $ | 46,371 |
| | 62.5 | % | | $ | 14,364 |
| | 31.0 | % |
Research and Development
Research and development expenses increased by $4.3 million, or 25.7%, for the nine months ended September 30, 2014, compared to the same period in the prior year. Research and development expense increased as we added headcount to enhance existing products and develop future product capability and new customer solutions.
Sales and Marketing
Sales and marketing costs increased by $8.9 million for the nine months ended September 30, 2014, compared to the same period in the prior year. The growth in sales and marketing expense was primarily due to an increase in personnel costs and related expense to further enhance direct selling opportunities and to support sales growth into additional geographic areas.
General and Administrative
General and administrative expenses increased by $1.1 million for the nine months ended September 30, 2014, compared to the same period in the prior year. The growth in general and administrative expense was primarily due to an increase in personnel costs and related expenses of approximately $1.9 million and increased cost of being a public company of approximately $0.9 million, driven by a headcount increase to support our growth. This increase was offset by a reduction in our professional services expense of approximately $1.0 million and bad debt expense of approximately $0.7 million due to our increased collection efforts. The remaining increase is due to our overall growth.
Net Interest Expense
|
| | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| | | % of Total | | | | % of Total | | Change |
| 2014 | | Revenue | | 2013 | | Revenue | | Amount | | % |
| (in thousands) |
Interest income | $ | (87 | ) | | (0.1 | )% | | $ | (12 | ) | | — | % | | $ | (75 | ) | | 625 | % |
Interest expense | 1,638 |
| | 1.7 | % | | 2,187 |
| | 2.9 | % | | (549 | ) | | (25.1 | )% |
Total net interest expense | $ | 1,551 |
| | 1.6 | % | | $ | 2,175 |
| | 2.9 | % | | $ | (624 | ) | | (28.7 | )% |
Net interest expense decreased by $0.6 million for the nine months ended September 30, 2014, compared to the same period in the prior year. The decrease was primarily attributable to the amendment made to our debt facility in March 2014, which lowered the overall interest rate on our outstanding debt balances.
Foreign Exchange
Foreign exchange loss was essentially unchanged at $2.3 million, for the nine months ended September 30, 2014 compared to the same period in 2013.
Income Tax Expense
Income tax benefit was $0.2 million for the nine months ended September 30, 2014 compared to income tax expense of $2.0 million for the same period in 2013. The decrease in income tax expense is related primarily to the release of valuation allowance against deferred tax assets, reduced foreign withholding taxes and a reduction in the FIN48 liability recorded in the nine months ended September 30, 2014 .
Liquidity and Capital Resources
We have funded our operations from 2005 to September 30, 2014 primarily with net proceeds from issuances of preferred stock of approximately $105 million, net proceeds from our IPO of approximately $44.8 million, net proceeds from our follow-on public common stock offering of approximately $41.7 million and, to a lesser extent, borrowings under credit facilities.
As of September 30, 2014, our capital resources consisted principally of cash and cash equivalents totaling $64.4 million. Our cash and cash equivalents are comprised primarily of money market funds and time deposits.
We restructured our loan arrangement with Silicon Valley Bank during the first quarter of 2014 to reduce our financing costs. We also used a portion of our initial public offering proceeds to repay the entire $15 million outstanding principal amount under our subordinated loan agreement with Silver Lake Waterman in the first quarter of 2014 and terminated our Silver Lake Waterman loan. Our Silicon Valley Bank loan arrangement is described below.
Cash continues to be used in operations and we expect that our current loan agreement with Silicon Valley Bank (or refinancing thereof), cash generated from operations and the net proceeds of our IPO and follow-on offering will provide cash sufficient to meet our currently anticipated cash requirements for at least the next twelve months.
Our cash flows were as follows (in thousands):
|
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2014 | | 2013 | | Change |
Cash Provided by (Used in) | | | | | |
Operating | $ | (12,971 | ) | | $ | (16,978 | ) | | $ | 4,007 |
|
Investing | $ | (4,334 | ) | | $ | (1,962 | ) | | $ | (2,372 | ) |
Financing | $ | 42,700 |
| | $ | 20,017 |
| | $ | 22,683 |
|
Operating Activities
Cash flows from operating activities are an additional measure of our overall business performance, as it enables us to analyze our financial performance without the effects of certain non-cash items such as depreciation, amortization and stock-based compensation expense.
Cash flow used in operating activities during the nine months ended September 30, 2014 consisted primarily of a net loss of $13.7 million as well as working capital requirements and other activities of $0.8 million. The decrease in cash used in operating activities during the nine months ended September 30, 2014 compared to the same period in 2013 was primarily due to increased working capital needs to support the continued growth of the business.
Investing Activities
Our investing activities have consisted primarily of purchases of equipment, including software.
For the nine months ended September 30, 2014, net cash used for investing activities was $4.3 million, compared to $2.0 million for the nine months ended September 30, 2013. Capital expenditures increased by $2.3 million during the nine months ended September 30, 2014 compared to the same period in the prior year, primarily due to the acquisition of computer hardware and other equipment.
Financing Activities
Our financing activities have consisted primarily of our follow-on public offering of common stock and the incurrence and repayment of indebtedness under loan arrangements.
For the nine months ended September 30, 2014, net cash provided by financing activities was $42.7 million, consisting primarily of proceeds from our August 2014 follow-on offering of common stock. The increase in cash provided by financing activities during the nine months ended September 30, 2014 compared to the same period in 2013 was mainly due to the follow-on offering proceeds, offset by the decrease in net borrowings of approximately $20.0 million compared to the same period in the prior year.
Operating and Capital Expenditure Requirements
In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our business activities, grow our customer base, implement and enhance our information technology and enterprise resource planning system and operate as a public company. As revenues increase, we expect our accounts receivable balance to increase. Any such increase in accounts receivable may not be completely offset by increases in accounts payable and accrued expenses, which would likely result in greater working capital requirements.
If our available cash balances are insufficient to satisfy our liquidity requirements, we may seek to sell equity or convertible debt securities or enter into additional credit facilities. The sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of convertible debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, or at all.
Our estimates of the period of time through which our financial resources will be adequate to support our operations and the costs to support research and development and our sales and marketing activities are forward-looking statements and involve risks and uncertainties and actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in the section “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC on February 21, 2014. We have based our estimates on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we currently expect.
Our short- and long-term capital requirements will depend on many factors, including the following:
| |
• | our development of new products; |
| |
• | market acceptance of our products and our competitive position in the marketplace; |
| |
• | our ability to generate cash from operations; |
| |
• | our ability to control our costs; |
| |
• | the emergence of competing or complementary technological developments; |
| |
• | the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights or participating in litigation-related activities; and |
| |
• | the acquisition of businesses, products and technologies. |
Silicon Valley Bank Loan
On March 6, 2014, we entered into an Amended and Restated Loan Agreement with SVB to replace our former $22.5 million Senior Loan facility with SVB. The Amended and Restated Loan Agreement includes a five-year term loan of $25.0 million (“Term Loan”), a $15.0 million secured revolving line of credit (“Revolver”) and a $5 million secured line for letters of credit, foreign exchange and cash management services. The Term Loan has an initial floating interest rate of 2.75% above the U.S. prime rate, subject to a minimum interest rate of 4.25% and is secured by substantially all of our assets, including intellectual property. At September 30, 2014, the interest rate was 6.0%. After the achievement of the one of the two performance triggers described in the following sentence, the interest rate will be reduced to 2.25% above the U.S. prime rate; after the achievement of the second performance trigger the interest rate will be further reduced to 1.75% above the U.S. prime rate. The performance triggers are the following: (i) our achievement, on a consolidated basis, of positive EBITDA (as defined in the loan agreement) for two consecutive fiscal quarters, and (ii) the completion of an equity offering resulting in net proceeds to the Company of at least $50 million. The Term Loan provides for monthly payments of interest only until April 1, 2015; thereafter we are required to repay the outstanding principal amount in 48 monthly installments. The Term Loan has a maturity of March 1, 2019. If we prepay the Term Loan within one year of the Amended and Restated Loan Agreement, we will have to pay a prepayment premium of $250,000; thereafter, the Term Loan may be prepaid without penalty.
Under the Revolver, we may draw up to 80% of eligible domestic trade receivables, 70% of eligible foreign trade receivables and 35% of eligible accrued but unbilled accounts up to a maximum of $15.0 million. The Revolver has a three-year term and bears interest at a floating interest rate of 1% above the U.S. prime rate, subject to a minimum interest rate of 4.25% and is secured by substantially all of our assets, including intellectual property. We are also required to pay an unused facility fee, monthly in arrears, of 0.25% per annum of the unused amount of the Revolver. The Revolver may be prepaid at any time without penalty. As of September 30, 2014, we had no borrowings outstanding on our Revolver and had $15.0 million available.
The Amended and Restated Loan Agreement requires us to maintain compliance with the following financial covenants:
| |
• | A minimum liquidity ratio — defined as the sum of our consolidated unrestricted cash and cash equivalents plus eligible net accounts receivable (as defined in the Amended and Restated Loan Agreement) divided by the amount of outstanding obligations to the lender — of 1.35, as measured at the end of each calendar month; |
| |
• | A minimum two-quarter rolling EBITDA as follows: |
| |
• | $(10.0) million for the quarter ending March 31, 2014; |
| |
• | $(7.5) million for the quarters ending June 30, 2014 and September 30, 2014; |
| |
• | $(5.0) million for the quarter ending December 31, 2014; |
| |
• | $(2.5) million for the quarter ending March 31, 2015; |
| |
• | $(1.25) million for the quarter ending June 30, 2015; and |
| |
• | $0 for each quarter thereafter. |
EBITDA as defined in the Amended and Restated Loan Agreement is permitted to exclude non-cash stock compensation expense, non-cash foreign currency translation expense and other non-cash adjustments made in accordance with GAAP.
The Amended and Restated Loan Agreement contains certain restrictive covenants that limit our ability to, among other things, incur liens on the our assets or incur additional debt, pay dividends, make investments or engage in acquisitions, and that prevent dissolution, liquidation, merger or a sale of our assets without the prior consent of SVB. The agreement also contains usual and customary events of default, the occurrence of which may result in all outstanding amounts under the loan agreement becoming due and payable immediately, and also imposes an interest penalty of an additional 5% above the otherwise applicable interest rate at any time when an event of default is continuing. As of September 30, 2014, we were in compliance with all covenants under the Amended and Restated Agreement.
Contractual Obligations and Commercial Commitments
The following table discloses aggregate information about our contractual obligations and periods in which payments are due as of September 30, 2014 (in thousands):
|
| | | | | | | | | | | | | | | | | | | |
| Payments Due By Period |
| Total | | Less Than 1 Year | | 1-3 Years | | 3-5 Years | | More Than 5 Years |
Operating leases | $ | 6,629 |
| | $ | 1,779 |
| | $ | 2,751 |
| | $ | 1,493 |
| | $ | 606 |
|
Silicon Valley Bank term loan (1) | 25,000 |
| | 3,125 |
| | 12,500 |
| | 9,375 |
| | — |
|
Total | $ | 31,629 |
| | $ | 4,904 |
| | $ | 15,251 |
| | $ | 10,868 |
| | $ | 606 |
|
| |
(1) | The Silicon Valley Bank term loan matures in March 2019. The initial interest is payable at a floating rate of 2.75% above the U.S prime rate, subject to a minimum interest rate of 4.25%, which was 6.0% at September 30, 2014. We are required to make monthly interest-only payments through March 2015. |
Operating leases relate to our office leases for various locations across the globe. We have several office leases expiring at different times through 2019. Our principal office leases are in Richardson, Texas, Reading, UK, Bangalore, India and Shanghai, China.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Non-GAAP Financial Measures
In addition to our GAAP operating results, we use certain non-GAAP financial measures when planning, monitoring, and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures, tax position, depreciation, amortization, stock-based compensation expense and certain other expenses. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for revenue recognized in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces its usefulness as a comparative measure. We believe that these non-GAAP measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.
The presentation of non-GAAP net loss, non-GAAP net loss per share, non-GAAP gross profit, non-GAAP operating loss and other non-GAAP financial measures in this report is not meant to be a substitute for “net loss,” “net loss per share,” “gross profit,” “operating loss” or other financial measures presented in accordance with GAAP, but rather should be evaluated in conjunction with such data. Our definition of “non-GAAP net loss,” “non-GAAP net loss per share,” “non-GAAP gross profit,” “non-GAAP operating loss” and other non-GAAP financial measures may differ from similarly titled non-GAAP measures used by other companies and may differ from period to period. In reporting non-GAAP measures in the future, we may make other adjustments for expenses and gains we do not consider reflective of core operating performance in a particular period and may modify “non-GAAP net loss,” “non-GAAP net loss per share,” “non-GAAP gross profit,” “non-GAAP operating loss” and such other non-GAAP measures by excluding these expenses and gains.
Non-GAAP gross profit, software products gross profit and maintenance gross profit. We define non-GAAP gross profit as gross profit plus stock-based compensation expense and amortization and depreciation expense. We consider non-GAAP gross profit to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses, allowing for a comparison of our sales margins over multiple periods.
Non-GAAP operating expenses, research and development expense (“R&D”), sales and marketing expense (“S&M”), and general and administrative expense (“G&A”). We define non-GAAP operating expenses as operating expenses adjusted to exclude stock-based compensation expense and amortization and depreciation expense allocated to research and development, sales and marketing and general and administrative expenses. Similarly, we define non-GAAP research and development, sales
and marketing and general and administrative expenses as the relevant GAAP measure adjusted to exclude stock-based compensation expense and amortization and depreciation expense allocated to the particular expense item.
Non-GAAP operating loss. We define non-GAAP operating loss as operating loss adjusted to exclude stock-based compensation expense and amortization and depreciation expense. We consider non-GAAP operating loss to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses so management and investors can compare our core business operating results over multiple periods.
Non-GAAP net loss. We define non-GAAP net loss as non-GAAP operating loss after interest and taxes, as adjusted for uncertain tax positions component. We consider non-GAAP net loss to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses and foreign exchange gains and losses that are shown on the consolidated statement of operations and comprehensive loss. Excluding foreign exchange gains and losses helps management and investors compare our results to companies without such charges and over multiple periods, as foreign exchange gain or loss is difficult to predict and can vary greatly over multiple periods.
Non-GAAP net loss per share. We define non-GAAP net loss per share as non-GAAP net income divided by the non-GAAP weighted-average common shares outstanding, which assumes the conversion of preferred shares at the beginning of the period.
Mavenir Systems, Inc. and Subsidiaries
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
(in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Software Products | | | | | | | |
Revenue | $ | 27,311 |
| | $ | 20,788 |
| | $ | 77,503 |
| | $ | 58,052 |
|
Cost of revenue | 12,393 |
| | 10,806 |
| | 34,258 |
| | 28,220 |
|
Amortization and depreciation | 279 |
| | 133 |
| | 755 |
| | 375 |
|
Stock-based compensation | 221 |
| | 131 |
| | 431 |
| | 131 |
|
Gross profit (GAAP) | 14,918 |
| | 9,982 |
| | 43,245 |
| | 29,832 |
|
Gross profit (Non-GAAP) | 15,418 |
| | 10,246 |
| | 44,431 |
| | 30,338 |
|
Maintenance | | | | | | | |
Revenue | $ | 6,741 |
| | $ | 5,183 |
| | $ | 18,565 |
| | $ | 16,109 |
|
Cost of revenue | 3,677 |
| | 2,716 |
| | 9,364 |
| | 5,543 |
|
Gross profit (GAAP) | 3,064 |
| | 2,467 |
| | 9,201 |
| | 10,566 |
|
Gross profit (Non-GAAP) | 3,064 |
| | 2,467 |
| | 9,201 |
| | 10,566 |
|
Total Revenue | $ | 34,052 |
| | $ | 25,971 |
| | $ | 96,068 |
| | $ | 74,161 |
|
Total Gross Profit (GAAP) | $ | 17,982 |
| | $ | 12,449 |
| | $ | 52,446 |
| | $ | 40,398 |
|
Gross Profit Margin % (GAAP) | 52.8 | % | | 47.9 | % | | 54.6 | % | | 54.5 | % |
Gross Profit (Non-GAAP) | $ | 18,482 |
| | $ | 12,713 |
| | $ | 53,632 |
| | $ | 40,904 |
|
Gross Profit Margin % (Non-GAAP) | 54.3 | % | | 49.0 | % | | 55.8 | % | | 55.2 | % |
Operations Expenses | | | | | | | |
R&D (GAAP) | $ | 7,958 |
| | $ | 5,436 |
| | $ | 21,281 |
| | $ | 16,934 |
|
Amortization and depreciation | 527 |
| | 284 |
| | 1,584 |
| | 777 |
|
Stock-based compensation | 218 |
| | 209 |
| | 536 |
| | 209 |
|
R&D (Non-GAAP) | $ | 7,213 |
| | $ | 4,943 |
| | $ | 19,161 |
| | $ | 15,948 |
|
S&M (GAAP) | $ | 8,124 |
| | $ | 4,675 |
| | $ | 23,223 |
| | $ | 14,331 |
|
Amortization and depreciation | — |
| | — |
| | — |
| | — |
|
Stock-based compensation | 285 |
| | 400 |
| | 692 |
| | 400 |
|
S&M (Non-GAAP) | $ | 7,839 |
| | $ | 4,275 |
| | $ | 22,531 |
| | $ | 13,931 |
|
G&A (GAAP) | $ | 5,737 |
| | $ | 5,745 |
| | $ | 16,231 |
| | $ | 15,106 |
|
Amortization and depreciation | 530 |
| | 638 |
| | 1,607 |
| | 1,697 |
|
Stock-based compensation | 633 |
| | 121 |
| | 1,412 |
| | 421 |
|
G&A (Non-GAAP) | $ | 4,574 |
| | $ | 4,986 |
| | $ | 13,212 |
| | $ | 12,988 |
|
Total Operating Expenses (GAAP) | $ | 21,819 |
| | $ | 15,856 |
| | $ | 60,735 |
| | $ | 46,371 |
|
Operating Expenses (Non-GAAP) | $ | 19,626 |
| | $ | 14,204 |
| | $ | 54,904 |
| | $ | 42,867 |
|
Operating Loss (GAAP) | $ | (3,837 | ) | | $ | (3,407 | ) | | $ | (8,289 | ) | | $ | (5,973 | ) |
Net interest | 404 |
| | 1,068 |
| | 1,551 |
| | 2,175 |
|
Loss on early extinguishment of debt | — |
| | — |
| | 1,783 |
| | — |
|
Foreign exchange loss (gain) | 2,221 |
| | (316 | ) | | 2,275 |
| | 2,328 |
|
Income taxes | (657 | ) | | 354 |
| | (157 | ) | | 1,972 |
|
Net Loss (GAAP) | $ | (5,805 | ) | | $ | (4,513 | ) | | $ | (13,741 | ) | | $ | (12,448 | ) |
Operating Income (Loss) (Non-GAAP) | $ | (1,144 | ) | | $ | (1,491 | ) | | $ | (1,272 | ) | | $ | (1,963 | ) |
Net interest | 404 |
| | 1,068 |
| | 1,551 |
| | 2,175 |
|
Income taxes | (657 | ) | | 354 |
| | (157 | ) | | 1,972 |
|
Adjusted for uncertain tax positions component | (102 | ) | | — |
| | 184 |
| | — |
|
Net Loss (Non-GAAP) | $ | (789 | ) | | $ | (2,913 | ) | | $ | (2,850 | ) | | $ | (6,110 | ) |
Mavenir Systems, Inc. and Subsidiaries
Non-GAAP Net Loss Per Share
(all shares are weighted-average outstanding for period presented)
( In thousands, except per share data)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
GAAP weighted-average common shares outstanding | 27,392 |
| | 1,348 |
| | 25,012 |
| | 1,342 |
|
Conversion of preferred shares * | — |
| | 16,452 |
| | — |
| | 16,452 |
|
Adjusted weighted-average common shares outstanding | 27,392 |
| | 17,800 |
| | 25,012 |
| | 17,794 |
|
Non-GAAP net loss | $ | (789 | ) | | $ | (2,913 | ) | | $ | (2,850 | ) | | $ | (6,110 | ) |
Non-GAAP net loss per share | $ | (0.03 | ) | | $ | (0.16 | ) | | $ | (0.11 | ) | | $ | (0.34 | ) |
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* | Assumes conversion of preferred shares at beginning of period |
Implications of Being an Emerging Growth Company
As an emerging growth company, as defined under the Jumpstart Our Business Startups Act of 2012 (JOBS Act), we are subject to certain reduced reporting requirements as a public company. For example, until we are no longer an emerging growth company, we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act and we will be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the independent registered public accounting firm’s report on financial statements. We could remain an emerging growth company until as late as December 31, 2018 (the fiscal year-end following the fifth anniversary of our IPO).
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We are exposed to market risk related to inflation, changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we may enter into interest rate or exchange rate hedging arrangements to manage the risks described below.
Inflation Risk
We may be exposed to inflation risk in that some of our international operations, particularly in developing countries, may be subject to increased costs as a result of higher inflation. Because we compete with other solutions providers on a global basis, our customers would not expect, and may not be willing, to pay for any cost increases from inflation. Therefore, our future margins could be impacted. Where competitively possible we attempt to offset some of this risk with contracted price adjustments.
Interest Rate Risk
Cash held in our operating business units is generally available for local operations. Most of our cash is retained by our U.S. business. The majority of these funds are in low to zero interest bank accounts. Our borrowings under our Term Loan and Revolver with Silicon Valley Bank are at variable rates based on the U.S. prime rate and, as a result, increases in interest rates would generally result in increased interest expense on outstanding borrowings. A one-percent increase above the minimum floor calculation would increase our interest expense by as much as $0.3 million if the entire facilities were drawn throughout the year.
Foreign Currency Exchange Risk
We have significant international operations with subsidiaries and operations in eight countries outside of the U.S. and as such we face exposure to adverse movements in foreign currency exchange rates. While these exposures may change over time as business practices evolve, adverse movements in foreign currency exchange rates may have a material adverse impact on our financial results. Our primary exposures have been related to non-U.S. dollar-denominated net operating income or net operating losses. As a consequence, our results of operations would generally be adversely affected by an increase in the value of the U.S. dollar relative to the currencies of the countries in which we are profitable and a decrease in the value of the U.S. dollar relative to the currencies of the countries in which we are not profitable. However, based on the locations of our international operations and the amount of our operating results denominated in foreign currencies, we would not expect a 10% change in the value of the U.S. dollar from rates as of September 30, 2014, to have a material effect on our financial position or results of operations. If and when our international business grows substantially, relative to our U.S. business, the net exposure is likely to increase as will the impact of foreign exchange rate movements.
The functional currency for each of our non-U.S. subsidiaries is the applicable local currency. Assets and liabilities of a non-U.S. subsidiary are translated to U.S. dollars at period end exchange rates. Income and expense items are translated at the rates of exchange prevailing during the year. The adjustments resulting from translating the financial statements of the non-U.S. subsidiary are reflected in comprehensive income or loss.
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
We recorded net transaction losses of $2.2 million and approximately $2.3 million for the three and nine months ended September 30, 2014, respectively, compared to a gain of $0.3 million and loss of $2.3 million for the same periods in 2013.
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ITEM 4. CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
As of September 30, 2014, management carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon the evaluation, and due to the presence of the material weakness in internal control over financial reporting described in our Annual Report on Form 10-K for the year ended December 31, 2013, our chief executive officer and chief financial officer concluded that, as of September 30, 2014, our disclosure controls and procedures were not effective at the reasonable assurance level.
Previously Reported Material Weakness
Our management concluded that our internal control over financial reporting was ineffective as of December 31, 2013, because a material weakness existed in our internal control over financial reporting related to the period-end financial close and reporting process, which resulted in the failure to record certain entries and adjustments during the year-end closing and consolidation process. Specifically, this material weakness was the result of the following:
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a) | the ineffective design and maintenance of controls for the review, supervision and monitoring of our accounting operations throughout the organization and for monitoring and evaluating the adequacy of our internal control over financial reporting; |
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b) | ineffective controls over the preparation, review and approval of all financial statement account reconciliations; and |
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c) | ineffective controls over the review, approval, documentation and recording of our journal entries. Specifically, effective controls were not designed and in place to ensure the existence, accuracy and completeness of the journal entries recorded, both, recurring and non-recurring. |
As a result of this material weakness, our control environment is ineffective to ensure that the design and execution of our controls have consistently resulted in effective and timely review of our financial statements and supervision by appropriate individuals.
Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
As part of ongoing efforts to improve the design and operating effectiveness of our internal control environment and remediate this material weakness over financial reporting, we have provided training on how to document reviews to a level of precision sufficient to reduce the risk of error to an acceptable level. We have implemented a system which interfaces with our general ledger and allows us to automate the review and approval of reconciliations. We have begun to evaluate automated journal entry review and approval options and will implement a manual review process in the fourth quarter of 2014. Additionally, we continue the documentation and testing of our internal control over financial reporting. Management expects remediation efforts to progress throughout 2014, as we continue to improve our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS |
From time to time, we, our customers and our competitors are subject to various litigation and claims arising in the ordinary course of business. The software and communications infrastructure industries are characterized by frequent litigation and claims, including claims regarding patent and other intellectual property rights, claims for damages or indemnification for alleged breach under commercial supply or service contracts and claims regarding alleged improper hiring practices. From time to time we may be involved in various legal proceedings or claims but we are not aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or financial condition.
There have been no material changes in risk factors from those disclosed in Part 1, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which was filed with the Securities and Exchange Commission, or SEC, on February 21, 2014.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
(a) Unregistered Sales of Equity Securities
None.
(b) Use of Proceeds from Public Offering of Common Stock
In November 2013, we closed our IPO, in which we sold 5,320,292 shares of common stock and certain selling stockholders sold 129,708 shares of common stock at a price to the public of $10.00 per share, before underwriting discounts and commissions. The aggregate offering price for shares sold in the offering was approximately $53.2 million. In December 2013, the underwriters exercised a 30-day option to purchase additional shares of common stock at the initial public offering price, resulting in the issuance of an additional 145,339 shares for additional proceeds of approximately $1.5 million. The offer and sale of all of the shares in the IPO were registered under the Securities Act of 1933, as amended, ("Securities Act") pursuant to a registration statement on Form S-1 (File No. 333-191563), which was declared effective by the SEC on November 5, 2013 and a registration statement on Form S-1 (File No. 333-192148), which became automatically effective on November 6, 2013 pursuant to Rule 462(b) under the Securities Act. The offering commenced as of November 6, 2013 and did not terminate before all of the securities registered under the registration statements were sold. Morgan Stanley, BofA, Merrill Lynch, Deutsche Bank Securities and Needham & Company acted as the underwriters.
We raised approximately $44.8 million in net proceeds after deducting underwriting discounts and commissions of approximately $3.8 million and other estimated offering expenses of approximately $6.1 million. We did not receive any proceeds from the sale of shares by the selling stockholders in the IPO. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on November 7, 2013 pursuant to Rule 424(b) of the Securities Act. We invested the funds received in money market funds.
On November 19, 2013, we repaid $10.0 million outstanding under our senior loan with SVB. On March 5, 2014, we repaid the full $15.0 million amount outstanding under our subordinated loan agreement with Silver Lake Waterman Fund (“Silver Lake”). In addition to the repayment to Silver Lake, we estimate that we used approximately $16.3 million of the proceeds from our IPO for working capital and other general purposes during the nine months ended September 30, 2014.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES |
None.
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ITEM 4. MINE SAFETY DISCLOSURES |
Not applicable.
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ITEM 5. OTHER INFORMATION |
None.
(a) The following exhibits are filed as a part of this report:
|
| | | | | | | | | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | File No. | | Date of First Filing | | Exhibit Number | | Provided Herewith |
10.1 | Amended and Restated 2013 Employee Stock Purchase Plan. | — |
| | — |
| | — |
| | — |
| | X |
31.1 | Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a). | — |
| | — |
| | — |
| | — |
| | X |
31.2 | Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a). | — |
| | — |
| | — |
| | — |
| | X |
32.1* | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b). | — |
| | — |
| | — |
| | — |
| | X |
32.2* | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b). | — |
| | — |
| | — |
| | — |
| | X |
101** | Condensed Consolidated financial statements from the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014, formatted in XBRL. | — |
| | — |
| | — |
| | — |
| | X |
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* | This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference. |
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** | The following condensed consolidated financial statements from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014, formatted in XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: October 27, 2014
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Mavenir Systems, Inc. | |
| | |
By | | /s/ Terry Hungle | |
| | Terry Hungle |
| | Chief Financial Officer Principal financial officer and duly authorized signatory |
EXHIBIT INDEX
|
| | | | | | | | | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | File No. | | Date of First Filing | | Exhibit Number | | Provided Herewith |
10.1 | Amended and Restated 2013 Employee Stock Purchase Plan. | — |
| | — |
| | — |
| | — |
| | X |
31.1 | Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a). | — |
| | — |
| | — |
| | — |
| | X |
31.2 | Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a). | — |
| | — |
| | — |
| | — |
| | X |
32.1* | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b). | — |
| | — |
| | — |
| | — |
| | X |
32.2* | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b). | — |
| | — |
| | — |
| | — |
| | X |
101** | Condensed Consolidated financial statements from the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014, formatted in XBRL. | — |
| | — |
| | — |
| | — |
| | X |
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* | This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference. |
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** | The following condensed consolidated financial statements from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014, formatted in XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing. |