Oregon | 0-26844 | 93-0945232 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
5435 NE Dawson Creek Drive | |
Hillsboro, Oregon | 97124 |
(Address of Principal Executive Offices) | (Zip Code) |
Exhibit Number | Description | |
99.1 | Second Quarter 2014 Earnings Release, dated August 5, 2014 |
RADISYS CORPORATION | ||||
Date: | August 5, 2014 | By: | /s/ Allen Muhich | |
Allen Muhich | ||||
Chief Financial Officer and Vice President of Finance (Principal Financial and Accounting Officer) |
Exhibit Number | Description | |
99.1 | Press Release, dated August 5, 2014. |
• | Revenue increased sequentially by approximately 14% with improvement in Software-Solutions revenue of nearly 33%. |
◦ | Deferred revenue was up over 14% sequentially due primarily to early Media Resource Function (MRF) product shipments into our new target markets. |
• | We were awarded our first new business with our yet to be announced next generation platforms products. One of these awards was with a large North American carrier while another was with a leading equipment provider. |
• | We now have 25+ MRF trials in support of global Voice over LTE (VoLTE) deployments with both our MPX-12000 system and our virtualized software-only MRF (MPX-OS). These trials continue to progress well with certain customers preparing for network deployment in 2014. |
◦ | During the quarter, we won another meaningful MRF design win where our partner will be deploying our WebRTC video transcoding capabilities as part of their VoLTE solution. |
• | Non-GAAP R&D and SG&A expense of $16.1 million was at its lowest level in eight years reflecting our continuing progress in restructuring the business. |
• | Our contract manufacturing transition, which is expected to result in approximately $6 million in annual cost of goods sold savings or approximately 3 gross margin points, remains on track for completion by the end of the third quarter of 2014. |
• | Inventory decreased by over $4.0 million sequentially to $19.8 million, its lowest level in nearly four years, reflecting our efforts to optimize working capital. We expect to further reduce inventory during the second half of 2014. |
• | Cash and cash equivalents were $34.6 million at the end of the second quarter. During the quarter, we reduced outstanding debt under our Silicon Valley Bank line of credit by $5.0 million. Second quarter cash consumption excluding changes in debt was $2.7 million and included cash restructuring payments of $1.3 million.” |
• | Third quarter revenue is expected between $48 million and $54 million with Software-Solutions revenue expected to increase sequentially by 10% to 15%. |
• | Non-GAAP gross margin in the third quarter is expected between 33% and 35% of sales and non-GAAP R&D and SG&A expenses are expected to approximate $16 million. |
• | Third quarter non-GAAP earnings are expected to range from a net loss of ($0.03) to a profit of $0.09 per share and cash generation is expected to be approximately $2 million. |
◦ | Third quarter profit and cash generation is highly dependent upon the receipt of cash from a large strategic carrier. The due date for this cash is late in our third quarter and if received following September 30, 2014 would result in fourth quarter revenue and profit recognition. |
• | 2014 revenue is expected between $190 million and $200 million. |
◦ | MRF revenue in support of Voice over LTE applications is expected to increase from about $1 million in 2013 to approximately $8 million in 2014. |
• | Non-GAAP gross margins are expected to exit 2014 in the mid to high-30’s due to expected growth in high margin Software-Solutions revenue combined with the completed contract manufacturing transition which is expected to add approximately three gross margin points when complete in the fall of 2014. |
• | Overall 2014 non-GAAP EPS is expected to approximate a $0.10 loss implying an annualized fourth quarter exit rate of approximately $0.30. The fourth quarter 2014 exit-rate may not be indicative of our 2015 profitability as we continue to evaluate investment levels required to meet next generation product deliverables. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenues | $ | 49,964 | $ | 65,438 | $ | 93,763 | $ | 133,616 | |||||||
Cost of sales: | |||||||||||||||
Cost of sales | 35,902 | 43,756 | 66,499 | 90,062 | |||||||||||
Amortization of purchased technology | 2,055 | 2,218 | 4,109 | 4,435 | |||||||||||
Gross margin | 12,007 | 19,464 | 23,155 | 39,119 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 8,408 | 12,020 | 16,827 | 23,555 | |||||||||||
Selling, general and administrative | 8,953 | 9,527 | 18,549 | 20,623 | |||||||||||
Intangible assets amortization | 1,260 | 1,304 | 2,557 | 2,608 | |||||||||||
Restructuring and other charges, net | 815 | (114 | ) | 2,115 | 1,156 | ||||||||||
Loss from operations | (7,429 | ) | (3,273 | ) | (16,893 | ) | (8,823 | ) | |||||||
Interest expense | (345 | ) | (281 | ) | (632 | ) | (613 | ) | |||||||
Other income, net | 157 | 226 | 336 | 373 | |||||||||||
Loss before income tax expense | (7,617 | ) | (3,328 | ) | (17,189 | ) | (9,063 | ) | |||||||
Income tax expense | 594 | 784 | 1,456 | 1,606 | |||||||||||
Net loss | $ | (8,211 | ) | $ | (4,112 | ) | $ | (18,645 | ) | $ | (10,669 | ) | |||
Net loss per share: | |||||||||||||||
Basic | $ | (0.23 | ) | $ | (0.14 | ) | $ | (0.57 | ) | $ | (0.37 | ) | |||
Diluted | $ | (0.23 | ) | $ | (0.14 | ) | $ | (0.57 | ) | $ | (0.37 | ) | |||
Weighted average shares outstanding | |||||||||||||||
Basic | 36,096 | 28,669 | 32,980 | 28,570 | |||||||||||
Diluted | 36,096 | 28,669 | 32,980 | 28,570 |
June 30, 2014 | December 31, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 34,606 | $ | 25,482 | |||
Accounts receivable, net | 42,091 | 41,359 | |||||
Inventories and inventory deposit, net | 19,776 | 25,409 | |||||
Other current assets | 17,664 | 8,443 | |||||
Total current assets | 114,137 | 100,693 | |||||
Property and equipment, net | 12,346 | 14,854 | |||||
Intangible assets, net | 49,844 | 56,510 | |||||
Other assets, net | 3,816 | 4,128 | |||||
Total assets | $ | 180,143 | $ | 176,185 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 34,736 | $ | 35,081 | |||
Deferred revenue | 12,503 | 8,167 | |||||
Other accrued liabilities | 15,126 | 15,525 | |||||
Line of credit | 10,000 | 15,000 | |||||
Convertible senior notes | 18,000 | — | |||||
Total current liabilities | 90,365 | 73,773 | |||||
Convertible senior notes | — | 18,000 | |||||
Other long-term liabilities | 3,197 | 3,276 | |||||
Total liabilities | 93,562 | 95,049 | |||||
Shareholders' equity: | |||||||
Common stock | 332,690 | 309,370 | |||||
Accumulated deficit | (247,735 | ) | (229,090 | ) | |||
Accumulated other comprehensive income | 1,626 | 856 | |||||
Total shareholders’ equity | 86,581 | 81,136 | |||||
Total liabilities and shareholders’ equity | $ | 180,143 | $ | 176,185 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net loss | $ | (8,211 | ) | $ | (4,112 | ) | $ | (18,645 | ) | $ | (10,669 | ) | |||
Adjustments to reconcile net loss to net cash | |||||||||||||||
(used in) provided by operating activities: | |||||||||||||||
Depreciation and amortization | 5,091 | 5,582 | 10,336 | 11,106 | |||||||||||
Stock-based compensation expense | 1,460 | 1,023 | 2,581 | 2,122 | |||||||||||
Write-off of purchased computer software | — | (200 | ) | — | 2,868 | ||||||||||
Net gain from sale of software assets | — | 43 | — | (1,532 | ) | ||||||||||
Other | 796 | (320 | ) | 3,570 | 145 | ||||||||||
Changes in operating assets and liabilities: | |||||||||||||||
Accounts receivable | (4,466 | ) | 5,341 | (565 | ) | 6,671 | |||||||||
Inventories | 3,953 | (1,288 | ) | 4,338 | 3,093 | ||||||||||
Other receivables | (5,389 | ) | (1,707 | ) | (7,096 | ) | (164 | ) | |||||||
Accounts payable | 2,393 | (730 | ) | (320 | ) | (4,961 | ) | ||||||||
Deferred revenue | 1,545 | (968 | ) | 4,336 | (2,743 | ) | |||||||||
Other operating assets and liabilities | 710 | 1,519 | (3,857 | ) | (836 | ) | |||||||||
Net cash (used in) provided by operating activities | (2,118 | ) | 4,183 | (5,322 | ) | 5,100 | |||||||||
Cash flows from investing activities: | |||||||||||||||
Capital expenditures | (599 | ) | (1,679 | ) | (1,277 | ) | (3,378 | ) | |||||||
Proceeds from sale of software assets | — | (98 | ) | — | 1,082 | ||||||||||
Net cash used in investing activities | (599 | ) | (1,777 | ) | (1,277 | ) | (2,296 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Borrowings (payments) on line of credit | (5,000 | ) | — | (5,000 | ) | 15,000 | |||||||||
Repayment of convertible senior notes | — | — | — | (16,919 | ) | ||||||||||
Proceeds from issuance of common stock | 140 | 199 | 21,020 | 418 | |||||||||||
Other financing activities, net | (66 | ) | (395 | ) | (301 | ) | (413 | ) | |||||||
Net cash provided by (used in) financing activities | (4,926 | ) | (196 | ) | 15,719 | (1,914 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (15 | ) | (32 | ) | 4 | (146 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | (7,658 | ) | 2,178 | 9,124 | 744 | ||||||||||
Cash and cash equivalents, beginning of period | 42,264 | 31,748 | 25,482 | 33,182 | |||||||||||
Cash and cash equivalents, end of period | $ | 34,606 | $ | 33,926 | $ | 34,606 | $ | 33,926 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
North America | $ | 19,604 | 39.3 | % | $ | 30,512 | 46.6 | % | $ | 36,434 | 38.9 | % | $ | 57,214 | 42.8 | % | |||||||
Asia Pacific | 15,600 | 31.2 | 19,432 | 29.7 | 33,095 | 35.3 | 45,954 | 34.4 | |||||||||||||||
Europe, the Middle East and Africa | 14,760 | 29.5 | 15,494 | 23.7 | 24,234 | 25.8 | 30,448 | 22.8 | |||||||||||||||
Total | $ | 49,964 | 100.0 | % | $ | 65,438 | 100.0 | % | $ | 93,763 | 100.0 | % | $ | 133,616 | 100.0 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
ATCA Platforms | $ | 22,966 | 46.0 | % | $ | 31,722 | 48.5 | % | $ | 46,158 | 49.2 | % | $ | 66,540 | 49.8 | % | |||||||
Software-Solutions | 10,400 | 20.8 | 12,612 | 19.3 | 18,241 | 19.5 | 24,261 | 18.1 | |||||||||||||||
COM Express and Rackmount Server | 13,456 | 26.9 | 14,218 | 21.7 | 23,917 | 25.5 | 28,845 | 21.6 | |||||||||||||||
Other Products | 3,142 | 6.3 | 6,886 | 10.5 | 5,447 | 5.8 | 13,970 | 10.5 | |||||||||||||||
Total Revenues | $ | 49,964 | 100.0 | % | $ | 65,438 | 100.0 | % | $ | 93,763 | 100.0 | % | $ | 133,616 | 100.0 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 30 | June 30 | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
GROSS MARGIN: | |||||||||||||||||||||||
GAAP gross margin | $ | 12,007 | 24.0 | % | $ | 19,464 | 29.7 | % | $ | 23,155 | 24.7 | % | $ | 39,119 | 29.3 | % | |||||||
(a) Amortization of acquired intangible assets | 2,055 | 2,218 | 4,109 | 4,435 | |||||||||||||||||||
(b) Stock-based compensation | 151 | 111 | 282 | 241 | |||||||||||||||||||
(c) Restructuring and other charges, net | — | — | — | — | |||||||||||||||||||
Non-GAAP gross margin | $ | 14,213 | 28.4 | % | $ | 21,793 | 33.3 | % | $ | 27,546 | 29.4 | % | $ | 43,795 | 32.8 | % | |||||||
RESEARCH AND DEVELOPMENT: | |||||||||||||||||||||||
GAAP research and development | $ | 8,408 | 16.8 | % | $ | 12,020 | 18.4 | % | $ | 16,827 | 17.9 | % | $ | 23,555 | 17.6 | % | |||||||
(b) Stock-based compensation | 324 | 234 | 553 | 483 | |||||||||||||||||||
Non-GAAP research and development | $ | 8,084 | 16.2 | % | $ | 11,786 | 18.0 | % | $ | 16,274 | 17.4 | % | $ | 23,072 | 17.3 | % | |||||||
SELLING, GENERAL AND ADMINISTRATIVE: | |||||||||||||||||||||||
GAAP selling, general and administrative | $ | 8,953 | 17.9 | % | $ | 9,527 | 14.6 | % | $ | 18,549 | 19.8 | % | $ | 20,623 | 15.4 | % | |||||||
(b) Stock-based compensation | 985 | 678 | 1,746 | 1,398 | |||||||||||||||||||
Non-GAAP selling, general and administrative | $ | 7,968 | 15.9 | % | $ | 8,849 | 13.5 | % | $ | 16,803 | 17.9 | % | $ | 19,225 | 14.4 | % | |||||||
INCOME (LOSS) FROM OPERATIONS: | |||||||||||||||||||||||
GAAP loss from operations | $ | (7,429 | ) | (14.9 | )% | $ | (3,273 | ) | (5.0 | )% | $ | (16,893 | ) | (18.0 | )% | $ | (8,823 | ) | (6.6 | )% | |||
(a) Amortization of acquired intangible assets | 3,315 | 3,522 | 6,666 | 7,043 | |||||||||||||||||||
(b) Stock-based compensation | 1,460 | 1,023 | 2,581 | 2,122 | |||||||||||||||||||
(c) Restructuring and acquisition-related charges, net | 815 | (114 | ) | 2,115 | 1,156 | ||||||||||||||||||
Non-GAAP income (loss) from operations | $ | (1,839 | ) | (3.7 | )% | $ | 1,158 | 1.8 | % | $ | (5,531 | ) | (5.9 | )% | $ | 1,498 | 1.1 | % | |||||
NET INCOME (LOSS): | |||||||||||||||||||||||
GAAP net loss | $ | (8,211 | ) | (16.4 | )% | $ | (4,112 | ) | (6.3 | )% | $ | (18,645 | ) | (19.9 | )% | $ | (10,669 | ) | (8.0 | )% | |||
(a) Amortization of acquired intangible assets | 3,315 | 3,522 | 6,666 | 7,043 | |||||||||||||||||||
(b) Stock-based compensation | 1,460 | 1,023 | 2,581 | 2,122 | |||||||||||||||||||
(c) Restructuring and acquisition-related charges, net | 815 | (114 | ) | 2,115 | 1,156 | ||||||||||||||||||
(d) Income taxes | 119 | 440 | 596 | 973 | |||||||||||||||||||
Non-GAAP net income (loss) | $ | (2,502 | ) | (5.0 | )% | $ | 759 | 1.2 | % | $ | (6,687 | ) | (7.1 | )% | $ | 625 | 0.5 | % | |||||
GAAP weighted average diluted shares | 36,096 | 28,669 | 32,980 | 28,570 | |||||||||||||||||||
Escrow shares | — | — | — | 30 | |||||||||||||||||||
Dilutive equity awards included in | |||||||||||||||||||||||
non-GAAP earnings per share | — | 729 | — | 715 | |||||||||||||||||||
Non-GAAP weighted average diluted shares | 36,096 | 29,398 | 32,980 | 29,315 | |||||||||||||||||||
GAAP net loss per share (diluted) | $ | (0.23 | ) | $ | (0.14 | ) | $ | (0.57 | ) | $ | (0.37 | ) | |||||||||||
Non-GAAP adjustments detailed above | 0.16 | 0.17 | 0.37 | 0.39 | |||||||||||||||||||
Non-GAAP net income (loss) per share (diluted) | $ | (0.07 | ) | $ | 0.03 | $ | (0.20 | ) | $ | 0.02 |
Three Months Ended | Twelve Months Ended | ||||||||||
September 30, 2014 | December 31, 2014 | ||||||||||
Low End | High End | Mid Point | |||||||||
GAAP net loss | $ | (6.5 | ) | $ | (2.3 | ) | $ | (26.3 | ) | ||
(a) Amortization of acquired intangible assets | 3.4 | 3.4 | 13.4 | ||||||||
(b) Stock-based compensation | 1.6 | 1.6 | 5.9 | ||||||||
(c) Restructuring and acquisition-related charges, net | 0.3 | 0.3 | 2.7 | ||||||||
(d) Income taxes | 0.2 | 0.3 | 0.9 | ||||||||
Total adjustments | 5.5 | 5.6 | 22.9 | ||||||||
Non-GAAP net income (loss) | $ | (1.0 | ) | $ | 3.3 | $ | (3.4 | ) | |||
GAAP weighted average shares | 37,000 | 37,000 | 35,000 | ||||||||
Non-GAAP adjustments | — | 1,000 | — | ||||||||
Non-GAAP weighted average shares (diluted) (I) | 37,000 | 38,000 | 35,000 | ||||||||
GAAP net loss per share | $ | (0.18 | ) | $ | (0.06 | ) | $ | (0.76 | ) | ||
Non-GAAP adjustments detailed above | 0.15 | 0.15 | 0.66 | ||||||||
Non-GAAP net income (loss) per share (diluted) (I) | $ | (0.03 | ) | $ | 0.09 | $ | (0.10 | ) |
(I) | For all periods presented guidance for the diluted earnings per share calculation excludes the effects of the shares underlying our convertible senior notes as the inclusion would be anti-dilutive. |
Estimates at the midpoint of the guidance range | ||
Three Months Ended | ||
September 30, 2014 | ||
GAAP | 29.5 | % |
(a) Amortization of acquired intangible assets | 4.2 | |
(b) Stock-based compensation | 0.3 | |
Non-GAAP | 34.0 | % |
Estimates at the midpoint of the guidance range | |||
Three Months Ended | |||
September 30, 2014 | |||
GAAP | $ | 17.4 | |
(b) Stock-based compensation | (1.4 | ) | |
Non-GAAP | $ | 16.0 |
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