(Mark one) | |
[x] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended | March 31, 2017 |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from | to |
Commission File Number: | 0-26844 |
OREGON | 93-0945232 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
5435 N.E. Dawson Creek Drive, Hillsboro, OR | 97124 | |
(Address of principal executive offices) | (Zip Code) | |
(503) 615-1100 | ||
(Registrant's telephone number, including area code) | ||
(Former name, former address and former fiscal year, if changed since last report) |
Large accelerated filer | o | Accelerated filer | x | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | o |
Emerging growth company | o | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Page | ||
PART I. FINANCIAL INFORMATION | ||
Item 1. Financial Statements (Unaudited) | ||
Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2017 and 2016 | ||
Condensed Consolidated Statements of Comprehensive Loss – Three Months Ended March 31, 2017 and 2016 | ||
Condensed Consolidated Balance Sheets – March 31, 2017 and December 31, 2016 | ||
Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2017 and 2016 | ||
Notes to Condensed Consolidated Financial Statements | ||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | ||
Item 4. Controls and Procedures | ||
PART II. OTHER INFORMATION | ||
Item 1A. Risk Factors | ||
Item 6. Exhibits | ||
Signatures |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Revenues: | |||||||
Product | $ | 28,699 | $ | 47,317 | |||
Service | 8,911 | 7,829 | |||||
Total revenue | 37,610 | 55,146 | |||||
Cost of sales: | |||||||
Product | 22,175 | 35,732 | |||||
Service | 5,286 | 4,703 | |||||
Amortization of purchased technology | 1,927 | 1,927 | |||||
Total cost of sales | 29,388 | 42,362 | |||||
Gross margin | 8,222 | 12,784 | |||||
Research and development | 6,480 | 5,653 | |||||
Selling, general and administrative | 9,382 | 7,639 | |||||
Intangible asset amortization | 1,260 | 1,260 | |||||
Restructuring and other charges, net | 235 | 682 | |||||
Loss from operations | (9,135 | ) | (2,450 | ) | |||
Interest expense | (272 | ) | (117 | ) | |||
Other income (expense), net | (297 | ) | 139 | ||||
Loss before income tax expense | (9,704 | ) | (2,428 | ) | |||
Income tax expense | 304 | 537 | |||||
Net loss | $ | (10,008 | ) | $ | (2,965 | ) | |
Net loss per share: | |||||||
Basic | $ | (0.26 | ) | $ | (0.08 | ) | |
Diluted | $ | (0.26 | ) | $ | (0.08 | ) | |
Weighted average shares outstanding: | |||||||
Basic | 38,715 | 37,007 | |||||
Diluted | 38,715 | 37,007 | |||||
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Net loss | $ | (10,008 | ) | $ | (2,965 | ) | |
Other comprehensive income: | |||||||
Translation adjustments gain | 664 | 457 | |||||
Net adjustment for fair value of hedge derivatives, net of tax | 502 | 134 | |||||
Other comprehensive income | 1,166 | 591 | |||||
Comprehensive loss | $ | (8,842 | ) | $ | (2,374 | ) |
March 31, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 32,025 | $ | 33,087 | |||
Accounts receivable, net | 49,925 | 38,378 | |||||
Other receivables | 3,446 | 4,161 | |||||
Inventories, net | 10,845 | 20,021 | |||||
Other current assets | 3,557 | 2,990 | |||||
Total current assets | 99,798 | 98,637 | |||||
Property and equipment, net | 7,325 | 6,713 | |||||
Intangible assets, net | 14,388 | 17,575 | |||||
Long-term deferred tax assets, net | 1,013 | 1,117 | |||||
Other assets | 2,035 | 4,143 | |||||
Total assets | $ | 124,559 | $ | 128,185 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 13,674 | $ | 20,805 | |||
Accrued wages and bonuses | 4,144 | 6,572 | |||||
Deferred revenue | 6,496 | 5,715 | |||||
Line of credit | 40,000 | 25,000 | |||||
Other accrued liabilities | 6,631 | 7,571 | |||||
Total current liabilities | 70,945 | 65,663 | |||||
Long-term liabilities: | |||||||
Other long-term liabilities | 6,782 | 5,966 | |||||
Total long-term liabilities | 6,782 | 5,966 | |||||
Total liabilities | 77,727 | 71,629 | |||||
Commitments and contingencies (Note 7) | |||||||
Shareholders’ equity: | |||||||
Common stock — no par value, 100,000 shares authorized; 38,919 and 38,521 shares issued and outstanding at March 31, 2017 and December 31, 2016 | 340,811 | 339,715 | |||||
Accumulated deficit | (293,586 | ) | (281,600 | ) | |||
Accumulated other comprehensive loss: | |||||||
Cumulative translation adjustments | (368 | ) | (1,032 | ) | |||
Unrealized loss on hedge instruments | (25 | ) | (527 | ) | |||
Total accumulated other comprehensive loss | (393 | ) | (1,559 | ) | |||
Total shareholders’ equity | 46,832 | 56,556 | |||||
Total liabilities and shareholders’ equity | $ | 124,559 | $ | 128,185 |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (10,008 | ) | (2,965 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 4,358 | 4,345 | |||||
Inventory valuation allowance and adverse purchase commitment charges | 702 | 545 | |||||
Deferred income taxes | 195 | 12 | |||||
Stock-based compensation expense | 1,154 | 688 | |||||
Other | (185 | ) | 372 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (11,547 | ) | 22,134 | ||||
Other receivables | 741 | 8,254 | |||||
Inventories | 8,681 | 578 | |||||
Accounts payable | (7,038 | ) | (12,155 | ) | |||
Accrued restructuring | (1,124 | ) | 435 | ||||
Accrued wages and bonuses | (2,368 | ) | (3,207 | ) | |||
Deferred revenue | 1,578 | (16,693 | ) | ||||
Other | 350 | (661 | ) | ||||
Net cash provided by (used in) operating activities | (14,511 | ) | 1,682 | ||||
Cash flows from investing activities: | |||||||
Capital expenditures | (1,803 | ) | (422 | ) | |||
Net cash used in investing activities | (1,803 | ) | (422 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings on line of credit | 37,000 | 18,000 | |||||
Payments on line of credit | (22,000 | ) | (18,000 | ) | |||
Net settlement of restricted shares | (192 | ) | (2 | ) | |||
Other financing activities | 108 | 107 | |||||
Net cash provided by financing activities | 14,916 | 105 | |||||
Effect of exchange rate changes on cash | 336 | 254 | |||||
Net increase (decrease) in cash and cash equivalents | (1,062 | ) | 1,619 | ||||
Cash and cash equivalents, beginning of period | 33,087 | 20,764 | |||||
Cash and cash equivalents, end of period | $ | 32,025 | $ | 22,383 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 247 | $ | 123 | |||
Income taxes | $ | 286 | $ | 228 |
Fair Value Measurements as of March 31, 2017 | |||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||
Foreign currency forward contracts | $ | 846 | — | $ | 846 | — |
Fair Value Measurements as of December 31, 2016 | |||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||
Foreign currency forward contracts | $ | 94 | — | $ | 94 | — |
March 31, 2017 | December 31, 2016 | ||||||
Accounts receivable, gross | $ | 49,980 | $ | 38,433 | |||
Less: allowance for doubtful accounts | (55 | ) | (55 | ) | |||
Accounts receivable, net | $ | 49,925 | $ | 38,378 |
March 31, 2017 | December 31, 2016 | ||||||
Raw materials | $ | 16,917 | $ | 24,805 | |||
Work-in-process | — | 12 | |||||
Finished goods | 3,924 | 5,005 | |||||
20,841 | 29,822 | ||||||
Less: inventory valuation allowance | (9,996 | ) | (9,801 | ) | |||
Inventories, net | $ | 10,845 | $ | 20,021 |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Inventory, net | $ | 501 | $ | 266 | |||
Adverse purchase commitments(A) | 201 | 279 | |||||
Net charges | $ | 702 | $ | 545 |
(A) | When the Company takes possession of inventory reserved for under the adverse purchase liability (Note 7 — Commitments and Contingencies), the associated liability is transferred from other accrued liabilities to the excess and obsolete inventory valuation allowance. |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Employee-related restructuring expenses | $ | 42 | $ | 682 | |||
Integration-related and other non-recurring expenses | 193 | — | |||||
Restructuring and other charges, net | $ | 235 | $ | 682 |
• | $0.1 million net expense relating to the severance for 2 employees in connection with a reduction to our hardware engineering presence in Shenzhen; and |
• | $0.2 million in non-recurring legal expenses associated with closing a strategic agreement with a MediaEngine channel partner. |
• | $0.7 million net expense relating to the severance for 21 employees primarily in connection with a reduction to our hardware engineering presence in Asia. |
Severance, payroll taxes and other employee benefits | Facility reductions | Total | |||||||||
Balance accrued as of December 31, 2016 | $ | 1,347 | $ | 90 | $ | 1,437 | |||||
Additions | 156 | — | 156 | ||||||||
Reversals | (114 | ) | — | (114 | ) | ||||||
Expenditures | (1,136 | ) | (30 | ) | (1,166 | ) | |||||
Balance accrued as of March 31, 2017 | $ | 253 | $ | 60 | $ | 313 |
• | When Availability is 70% or more, the interest rate is the prime rate (as published in Wall Street Journal) plus 0.50%; |
• | When Availability is 30% or more and less than 70%, the interest rate is the prime rate plus 0.75%; and |
• | When Availability is below 30%, the interest rate is the prime rate plus 1.00%. |
• | When Availability is 70% or more, the interest rate is the prime rate plus 0.25%; |
• | When Availability is 30% or more and less than 70%, the interest rate is the prime rate plus 0.50%; and |
• | When Availability is below 30%, the interest rate is the prime rate plus 0.75%. |
• | When Availability is 70% or more, the commitment fee is 0.35% of the average unused portion of the revolving credit commitment; |
• | When Availability is 30% or more and less than 70%, the commitment fee is 0.325% of the average unused portion of the revolving credit commitment; and |
• | When Availability is below 30%, the commitment fee is 0.3% of the average unused portion of the revolving credit commitment. |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Warranty liability balance, beginning of the period | $ | 1,821 | $ | 2,553 | |||
Product warranty accruals | 223 | 385 | |||||
Utilization of accrual | (315 | ) | (603 | ) | |||
Warranty liability balance, end of the period | $ | 1,729 | $ | 2,335 |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Numerator | |||||||
Net loss | $ | (10,008 | ) | $ | (2,965 | ) | |
Denominator — Basic | |||||||
Weighted average shares used to calculate net loss per share, basic | 38,715 | 37,007 | |||||
Denominator — Diluted | |||||||
Weighted average shares used to calculate net loss per share, basic | 38,715 | 37,007 | |||||
Effect of dilutive restricted stock units (A) | — | — | |||||
Effect of dilutive stock options (A) | — | — | |||||
Weighted average shares used to calculate net loss per share, diluted | 38,715 | 37,007 | |||||
Net loss per share | |||||||
Basic | $ | (0.26 | ) | $ | (0.08 | ) | |
Diluted | $ | (0.26 | ) | $ | (0.08 | ) |
(A) | For the three months ended March 31, 2017 and 2016, the following equity awards, by type, were excluded from the calculation, as their effect would have been anti-dilutive (in thousands): |
Three Months Ended | |||||
March 31, | |||||
2017 | 2016 | ||||
Stock options | 3,827 | 2,808 | |||
Restricted stock units | 541 | 122 | |||
Performance based restricted stock units (B) | 1,049 | 2,305 | |||
Total equity award shares excluded | 5,417 | 5,235 |
(B) | Performance based restricted stock units are presented based on attainment of 100% of the performance goals being met. |
Three Months Ended | |||||
March 31, | |||||
2017 | 2016 | ||||
Stock options | — | 1,036 | |||
Restricted stock units | 467 | — | |||
Performance based restricted stock awards (A) | 670 | 680 | |||
Total | 1,137 | 1,716 |
(A) | On March 10, 2017, the Compensation Committee approved grants of performance-based restricted stock units ("PRSUs") to certain employees. The awards will vest only on satisfaction of certain performance criteria during two separate annual performance periods and a portion of the award earned will vest upon satisfaction of a time-based service component. 50% of the awards can be earned by meeting strategic revenue targets in fiscal year 2017 and 50% can be earned by meeting strategic revenue targets in fiscal year 2018. One-half of any PRSUs earned during each performance period will vest upon meeting the performance criteria, and the remaining half will be subject to a further time-based service component and will vest one year after meeting the targets. By meeting the relevant performance criteria set forth in the award agreement, employees can earn 0%, 75%, 100% or 125% of the award during each performance period. If an employee earns less than 100% of the award for the 2017 performance period, the employee is eligible to earn the remaining portion of the award in fiscal year 2018 if cumulative 2017 and 2018 strategic revenue targets are met in the two year period. Shares are presented based on attainment of 100% of the performance goals being met. At attainment of 125%, the amount of shares eligible to be earned is 837,500. |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Cost of sales | $ | 97 | $ | 46 | |||
Research and development | 230 | 153 | |||||
Selling, general and administrative | 827 | 489 | |||||
Total | $ | 1,154 | $ | 688 |
Contractual/ Notional Amount | Condensed Consolidated Balance Sheet Classification | Estimated Fair Value | ||||||||||||
Type of Cash Flow Hedge | Asset | (Liability) | ||||||||||||
Foreign currency forward exchange contracts | $ | 16,963 | Other current assets | $ | 846 | $ | — |
Contractual/ Notional Amount | Condensed Consolidated Balance Sheet Classification | Estimated Fair Value | ||||||||||||
Type of Cash Flow Hedge | Asset | (Liability) | ||||||||||||
Foreign currency forward exchange contracts | $ | 16,166 | Other current assets | $ | 94 | $ | — |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Cost of sales | $ | 10 | $ | 108 | |||
Research and development | 14 | 173 | |||||
Selling, general and administrative | 5 | 67 | |||||
Total | $ | 29 | $ | 348 |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Beginning balance of unrealized loss on forward exchange contracts | $ | (527 | ) | $ | (819 | ) | |
Other comprehensive income (loss) before reclassifications | 473 | (214 | ) | ||||
Amounts reclassified from other comprehensive income (loss) | 29 | 348 | |||||
Other comprehensive income (loss) | 502 | 134 | |||||
Ending balance of unrealized loss on forward exchange contracts | $ | (25 | ) | $ | (685 | ) |
• | Software-Systems. Software-Systems is comprised of three product lines: FlowEngine, MediaEngine and CellEngine, each of which delivers software-centric solutions to service providers. |
• | Hardware Solutions. Hardware Solutions includes the Company's DCEngine products and legacy embedded product portfolio which includes hardware solutions targeted for service providers. |
Three Months Ended | ||||||||
March 31, | ||||||||
2017 | 2016 | |||||||
Revenue | ||||||||
Software-Systems | $ | 10,149 | $ | 14,059 | ||||
Hardware Solutions | 27,461 | 41,087 | ||||||
Total revenues | $ | 37,610 | $ | 55,146 |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Gross margin | |||||||
Software-Systems | $ | 5,465 | $ | 8,788 | |||
Hardware Solutions | 4,781 | 5,969 | |||||
Corporate and other | (2,024 | ) | (1,973 | ) | |||
Total gross margin | $ | 8,222 | $ | 12,784 |
Three Months Ended | ||||||||
March 31, | ||||||||
2017 | 2016 | |||||||
Income (loss) from operations | ||||||||
Software-Systems | $ | (3,273 | ) | $ | 780 | |||
Hardware Solutions | (1,286 | ) | 1,327 | |||||
Corporate and other | (4,576 | ) | (4,557 | ) | ||||
Total loss from operations | $ | (9,135 | ) | $ | (2,450 | ) |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
United States | $ | 23,152 | $ | 37,765 | |||
Other North America | 19 | 78 | |||||
Asia Pacific ("APAC") | 5,419 | 7,618 | |||||
Netherlands | 5,223 | 7,235 | |||||
Other EMEA | 3,797 | 2,450 | |||||
Europe, the Middle East and Africa (“EMEA”) | 9,020 | 9,685 | |||||
Foreign Countries | 14,458 | 17,381 | |||||
Total | $ | 37,610 | $ | 55,146 |
March 31, 2017 | December 31, 2016 | ||||||
Property and equipment, net | |||||||
United States | $ | 4,950 | $ | 4,566 | |||
Other North America | 102 | 129 | |||||
China | 406 | 438 | |||||
India | 1,867 | 1,580 | |||||
Total APAC | 2,273 | 2,018 | |||||
Foreign Countries | 2,375 | 2,147 | |||||
Total property and equipment, net | $ | 7,325 | $ | 6,713 | |||
Intangible assets, net | |||||||
United States | $ | 14,388 | $ | 17,575 | |||
Total intangible assets, net | $ | 14,388 | $ | 17,575 |
The following customers accounted for more than 10% of the Company's total revenues: | |||||
Three Months Ended | |||||
March 31, | |||||
2017 | 2016 | ||||
Customer A | 41.2 | % | 42.3 | % | |
Customer B | 15.0 | % | 14.3 | % |
The following customers accounted for more than 10% of accounts receivable: | |||||
March 31, 2017 | December 31, 2016 | ||||
Customer A | 37.7 | % | 10.4 | % | |
Customer D | 24.0 | % | 32.6 | % | |
Customer B | N/A | 15.4 | % |
• | Software-Systems products are targeted at delivering differentiated solutions for service providers to enable their deployment of next generation networks and technologies. Software-Systems products include the following three product families: |
◦ | FlowEngine products target the communication service provider traffic management market and is a family of products designed to rapidly classify millions of data flows and then distribute these flows to thousands of Virtualized Network Functions ("VNF"). FlowEngine offloads the processing for packet classification and distribution, improving virtualized function utilization and making the overall Network Functions Virtualization ("NFV") architecture more efficient. A FlowEngine system consists of FlowEngine software running on a Traffic Distribution Engine ("TDE") platform. FlowEngine Software enables communication service providers to efficiently transition towards NFV and software-defined networking ("SDN") architectures allowing increased service agility and quicker time to revenue for new service offerings. FlowEngine accomplishes this by integrating a targeted subset of edge routing, data center switching, and load balancing functionality, coupled with standards based SDN protocols, enabling our customers to significantly reduce the investment necessary to efficiently process data flows in virtualized communications environments. |
◦ | MediaEngine products are designed into the IP Multimedia Subsystem ("IMS") core of telecom networks, providing the necessary media processing capabilities required for a broad range of applications including Voice over Long-Term Evolution ("VoLTE"), Voice over WiFi (“VoWifi”), Web Real-Time Communication ("WebRTC"), multimedia conferencing, as well as the transcoding required to achieve interoperability between legacy and new generation devices using disparate audio and video codecs. Our MediaEngine OneMRF strategy helps service providers consolidate their real-time IP media processing into a vendor and application agnostic platform, which drives cost out of their service delivery platform and enables accelerated deployment and introduction of new services. We sell a turnkey high density system, the MediaEngine MPX-12000, as well as a virtualized software-only vMRF for customers who require media processing in an NFV architecture or lower-density processing platforms. As service providers consolidate network capacity from older (3G and 2G) architectures onto new LTE architectures, they will deploy IMS and VoLTE applications. Our MediaEngine provides the essential media processing capability that enables service providers to deliver audio, video or other multimedia services over their all-IP networks. |
◦ | CellEngine software provides the enabling technology for fifth generation radio access networks (“5G RAN”) and is optimized for spectrum utilization, densification and network slicing to serve multiple users for mobility, latency and capacity. This builds on CellEngine’s portfolio of existing solutions for Radio Access Networks (“RAN”) and Evolved Packet Core (“EPC”) for Long-Term Evolution (“LTE”), LTE-Advanced and LTE-Advanced pro. An emerging area of focus is the Internet of Things (“IoT”) market for lower power wireless area networks which are enabled by Category M1 (“Cat-M1”) and Narrowband IoT. CellEngine software is licensed to Original Equipment Manufacturers (“OEMS”), Original Design Manufacturers (“ODMs”) and operators who are building solutions for femtocells, small cells, metrocells, picocells as well as in-building, stadium and smart cities leveraging centralized RAN (“CRAN”). Additionally, we leverage our CellEngine technology to enable applications to capture share in adjacent markets such as aerospace and defense, public safety and test and measurement. |
◦ | Also included in this segment is our Professional Services organization that is staffed with telecommunications experts who are available to assist our customers as they develop their own unique telecommunications products and applications as well as accelerating specific features developed across our Software-Systems product families. Our strategy is to enable the efficient and cost-effective adoption of our Software-Systems products as well as enabling service providers to migrate to next-generation software-defined network deployments. |
• | Hardware Solutions leverages our hardware design experience, coupled with our manufacturing, supply chain, integration and service capabilities, to enable continued differentiation from our competition. Our products include the following two primary product families: |
◦ | DCEngine products include open-based rack-scale systems, utilizing Open Compute Project (“OCP") accepted specifications, which enable service providers to migrate their existing infrastructure to embrace the efficiencies and scale of data center environments. This recently launched product suite brings the economies of the data center and the agility of the cloud to service provider infrastructure, allowing them to accelerate the transformation to cloud based compute, storage and networking fabrics utilizing the best of commodity components, open source hardware specifications and software coupled with world class service and support. The DCEngine platform enables service providers to drive innovation and the rapid scalable delivery of virtualized network functions at the network edge, enabling new services such as storage backup, video on demand and parental controls. |
◦ | Embedded products which includes our ATCA, computer-on-module express (COM Express) and rack mount servers. These products are predominantly hardware-based and include both our internal designs as well as increasingly leveraging third party hardware which incorporates our management software and services capabilities. Our products enable the control and movement of data in both 3G and LTE telecom networks and provide the hardware enablement for network elements applications such as Deep Packet Inspection ("DPI"), policy management and intelligent gateways (security, femto and LTE gateways). Additionally, our products enable image processing capabilities for healthcare markets and enable cost-effective and energy-efficient computing capabilities dedicated for industrial deployments. Our professional service organization of systems architects, hardware designers, and network experts accelerates our customers' time to market on these revenue generating assets. |
• | Revenues decreased $17.5 million to $37.6 million for the three months ended March 31, 2017 from $55.1 million for the three months ended March 31, 2016. Hardware Solutions revenue decreased $13.6 million, due to a $5.8 million decline in revenue from our DCEngine product line that was the result of non-linear ordering patterns from a tier-one U.S. service provider. Additionally, non-core legacy product sales declined $7.8 million as certain legacy products trend towards end of life. Software-Systems revenue decreased by $3.9 million as the result of the timing of orders from two of our top customers. |
• | Gross margin percent declined 130 basis points to 21.9% for the three months ended March 31, 2017 from 23.2% for the three months ended March 31, 2016. The $17.5 million decrease in revenue described above absorbed less of the fixed $1.9 million of amortized purchased technology recognized in both periods resulting in a 160 basis decrease quarter over quarter. This was partially offset by improved standard gross margins given product mix as well as higher DCEngine product margins due to maturing manufacturing and integration processes. |
• | R&D expense increased by $0.8 million to $6.5 million for the three months ended March 31, 2017 from $5.7 million in 2016. This is the result of increased headcount and other product development expenses related to continued investment in our strategic product lines, including the introduction of our new FlowEngine appliance expected to be deployed in mid-2017. |
• | SG&A expense increased $1.7 million to $9.4 million for the three months ended March 31, 2017 from $7.6 million for the three months ended March 31, 2016. This is the result of headcount growth in sales and marketing as we have accelerated hiring to support our strategic product line growth initiatives. |
• | Cash and cash equivalents on March 31, 2017 decreased $1.1 million to $32.0 million from $33.1 million at December 31, 2016. The decrease was the result of $14.5 million cash consumption from operations which was the result of working capital timing due to fulfillment of DCEngine product orders that were shipped during the quarter and capital expenditures of $1.8 million. The consumption was partially offset by a $15.0 million net draw on our line of credit. |
Three Months Ended | |||||
March 31, | |||||
2017 | 2016 | ||||
Revenues: | |||||
Product | 76.3 | % | 85.8 | % | |
Service | 23.7 | 14.2 | |||
Total revenues | 100.0 | 100.0 | |||
Cost of sales: | |||||
Product | 59.0 | 64.8 | |||
Service | 14.1 | 8.5 | |||
Amortization of purchased technology | 5.0 | 3.5 | |||
Total cost of sales | 78.1 | 76.8 | |||
Gross margin | 21.9 | 23.2 | |||
Research and development | 17.2 | 10.3 | |||
Selling, general, and administrative | 24.9 | 13.9 | |||
Intangible asset amortization | 3.5 | 2.3 | |||
Restructuring and other charges, net | 0.6 | 1.1 | |||
Loss from operations | (24.3 | ) | (4.4 | ) | |
Interest expense | (0.7 | ) | (0.2 | ) | |
Other income, net | (0.8 | ) | 0.2 | ||
Loss before income tax expense | (25.8 | ) | (4.4 | ) | |
Income tax expense | 0.8 | 1.0 | |||
Net loss | (26.6 | )% | (5.4 | )% |
Three Months Ended | |||||||||||
March 31, | |||||||||||
2017 | 2016 | Change | |||||||||
Revenue | |||||||||||
Software-Systems | $ | 10,149 | $ | 14,059 | (27.8 | )% | |||||
Hardware Solutions | 27,461 | 41,087 | (33.2 | ) | |||||||
Total revenues | $ | 37,610 | $ | 55,146 | (31.8 | )% |
Three Months Ended | ||||||||||
March 31, | ||||||||||
2017 | 2016 | Change | ||||||||
North America | $ | 23,171 | $ | 37,843 | (38.8 | )% | ||||
Asia Pacific | 5,419 | 7,618 | (28.9 | ) | ||||||
Europe, the Middle East and Africa ("EMEA") | 9,020 | 9,685 | (6.9 | ) | ||||||
Total | $ | 37,610 | $ | 55,146 | (31.8 | )% |
Three Months Ended | |||||
March 31, | |||||
2017 | 2016 | ||||
North America | 61.6 | % | 68.6 | % | |
Asia Pacific | 14.4 | 13.8 | |||
EMEA | 24.0 | 17.6 | |||
Total | 100.0 | % | 100.0 | % |
Three Months Ended | |||||||||||
March 31, | |||||||||||
2017 | 2016 | Change | |||||||||
Gross margin | |||||||||||
Software-Systems | $ | 5,465 | $ | 8,788 | (37.8 | )% | |||||
Hardware Solutions | 4,781 | 5,969 | (19.9 | ) | |||||||
Corporate and other | (2,024 | ) | (1,973 | ) | 2.6 | ||||||
Total gross margin | $ | 8,222 | $ | 12,784 | (35.7 | )% |
Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016 | Change | |||||||
Gross margin | |||||||||
Software-Systems | 53.8 | % | 62.5 | % | (13.9 | )% | |||
Hardware Solutions | 17.4 | 14.5 | 20.0 | ||||||
Corporate and other | — | — | — | ||||||
Total gross margin | 21.9 | % | 23.2 | % | (5.6 | )% |
Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016 | Change | |||||||
Research and development | $ | 6,480 | $ | 5,653 | 14.6% | ||||
Selling, general and administrative | 9,382 | 7,639 | 22.8 | ||||||
Intangible asset amortization | 1,260 | 1,260 | — | ||||||
Restructuring and other charges, net | 235 | 682 | (65.5) | ||||||
Total | $ | 17,357 | $ | 15,234 | 13.9% |
• | $0.1 million net expense relating to the severance for 2 employees in connection with a reduction to our hardware engineering presence in Shenzhen; and |
• | $0.2 million in non-recurring legal expenses associated with closing a strategic agreement with a MediaEngine channel partner. |
• | $0.7 million net expense relating to the severance for 21 employees primarily in connection with a reduction to our hardware engineering presence in Asia. |
Three Months Ended | ||||||||||
March 31, | ||||||||||
2017 | 2016 | Change | ||||||||
Cost of sales | $ | 97 | $ | 46 | 110.9 | % | ||||
Research and development | 230 | 153 | 50.3 | |||||||
Selling, general and administrative | 827 | 489 | 69.1 | |||||||
Total | $ | 1,154 | $ | 688 | 67.7 | % |
Three Months Ended | |||||||||||
March 31, | |||||||||||
2017 | 2016 | Change | |||||||||
Income (loss) from operations | |||||||||||
Software-Systems | $ | (3,273 | ) | $ | 780 | (519.6 | )% | ||||
Hardware Solutions | (1,286 | ) | 1,327 | (196.9 | ) | ||||||
Corporate and other | (4,576 | ) | (4,557 | ) | 0.4 | ||||||
Total income (loss) from operations | $ | (9,135 | ) | $ | (2,450 | ) | 272.9 | % |
Three Months Ended | ||||||||||
March 31, | ||||||||||
2017 | 2016 | Change | ||||||||
Interest expense | $ | (272 | ) | $ | (117 | ) | 132.5 | % | ||
Interest income | 45 | 38 | 18.4 | |||||||
Other income (expense), net | (342 | ) | 101 | (438.6 | ) | |||||
Total | $ | (569 | ) | $ | 22 | (2,686.4 | )% |
Three Months Ended | ||||||||||
March 31, | ||||||||||
2017 | 2016 | Change | ||||||||
Income tax expense | $ | 304 | $ | 537 | (43.4 | )% |
March 31, 2017 | December 31, 2016 | March 31, 2016 | |||||||||
Cash and cash equivalents | $ | 32,025 | $ | 33,087 | $ | 22,383 | |||||
Working capital | 28,853 | 32,974 | 30,551 | ||||||||
Accounts receivable, net | 49,925 | 38,378 | 38,813 | ||||||||
Inventories, net | 10,845 | 20,021 | 30,095 | ||||||||
Accounts payable | 13,674 | 20,805 | 31,214 | ||||||||
Line of credit | 40,000 | 25,000 | 15,000 |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Operating Activities | |||||||
Net loss | (10,008 | ) | $ | (2,965 | ) | ||
Non-cash adjustments | 6,224 | 5,683 | |||||
Changes in operating assets and liabilities | (10,727 | ) | (1,036 | ) | |||
Cash provided by operating activities | (14,511 | ) | 1,682 | ||||
Cash used in investing activities | (1,803 | ) | (422 | ) | |||
Cash provided by financing activities | 14,916 | 105 | |||||
Effects of exchange rate changes | 336 | 254 | |||||
Net increase (decrease) in cash and cash equivalents | $ | (1,062 | ) | $ | 1,619 |
• | Accounts receivable increased by $11.5 million due to the timing of collections and shipments to a tier-one U.S. service provider associated with DCEngine sales; |
• | Inventories decreased by $8.7 million as the result of the aforementioned DCEngine sales; |
• | Accounts payable decreased $7.0 million due to decreases in payables related to the fulfillment of DCEngine orders as well as decreases in payables to our contract manufacturer; |
• | Accrued wages and bonuses decreased $2.4 million due to the payment of accrued severance and accrued bonuses. |
• | Short-term and long-term deferred revenue increased $1.6 million due to the recognition of deferred service contracts. |
• | the Company's business strategy; |
• | changes in reporting segments; |
• | expectations and goals for revenues, gross margin, research and development ("R&D") expenses, selling, general and administrative ("SG&A") expenses and profits; |
• | the impact of our restructuring events on future operating results, including statements related to future growth, expense savings or reduction or operational and administrative efficiencies; |
• | timing of revenue recognition; |
• | expected customer orders; |
• | our projected liquidity; |
• | future operations and market conditions; |
• | industry trends or conditions and the business environment; |
• | future levels of inventory and backlog and new product introductions; |
• | financial performance, revenue growth, management changes or other attributes of Radisys following acquisition or divestiture activities |
• | continued implementation of the Company's next-generation datacenter product; and |
• | other statements that are not historical facts. |
Exhibit 10.1 | First Amendment to the Credit Agreement, dated January 5, 2017, between Radisys Corporation, as borrower, Silicon Valley Bank, as administrative agent, and the other lenders party thereto. Incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 10, 2017 (SEC File No. 000-26844). |
Exhibit 31.1* | Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Exhibit 31.2* | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.1** | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.2** | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS* | XBRL Instance Document |
101.SCH* | XBRL Taxonomy Extension Schema |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase |
101.LAB* | XBRL Taxonomy Extension Label Linkbase |
101.PRE* | XBRL Taxonomy Presentation Linkbase |
101.DEF* | XBRL Taxonomy Definition Linkbase |
* | Filed herewith |
** | Furnished herewith |
RADISYS CORPORATION | ||||
Dated: | May 2, 2017 | By: | /s/ Brian Bronson | |
Brian Bronson | ||||
President and Chief Executive Officer | ||||
Dated: | May 2, 2017 | By: | /s/ Jonathan Wilson | |
Jonathan Wilson | ||||
Chief Financial Officer and Vice President of Finance (Principal Financial and Accounting Officer) |
Exhibit 10.1 | First Amendment to the Credit Agreement, dated January 5, 2017, between Radisys Corporation, as borrower, Silicon Valley Bank, as administrative agent, and the other lenders party thereto. Incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 10, 2017 (SEC File No. 000-26844). |
Exhibit 31.1* | Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Exhibit 31.2* | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.1** | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.2** | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS* | XBRL Instance Document |
101.SCH* | XBRL Taxonomy Extension Schema |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase |
101.LAB* | XBRL Taxonomy Extension Label Linkbase |
101.PRE* | XBRL Taxonomy Presentation Linkbase |
101.DEF* | XBRL Taxonomy Definition Linkbase |
* | Filed herewith |
** | Furnished herewith |
/s/ Brian Bronson |
Brian Bronson |
Chief Executive Officer |
/s/ Jonathan Wilson |
Jonathan Wilson |
Chief Financial Officer and Vice President of Finance (Principal Financial and Accounting Officer) |
/s/ Brian Bronson |
Brian Bronson |
Chief Executive Officer |
May 2, 2017 |
/s/ Jonathan Wilson |
Jonathan Wilson |
Chief Financial Officer and Vice President of Finance (Principal Financial and Accounting Officer) |
May 2, 2017 |
DEI Document - shares |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Apr. 27, 2017 |
Dec. 31, 2016 |
|
DEI [Abstract] | |||
Common Stock, Shares, Issued | 38,441,000 | 37,026,000 | |
Entity Registrant Name | Radisys Corporation | ||
Entity Central Index Key | 0000873044 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Accelerated Filer | ||
Document Type | 10-Q | ||
Document Period End Date | Mar. 31, 2017 | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | Q1 | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 38,928,674 | ||
Common Stock, Shares, Outstanding | 38,441,000 | 37,026,000 |
Condensed Consolidated Statement of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Net income (loss) | $ (10,008) | $ (2,965) |
Other comprehensive income (loss): | ||
Translation adjustments | 664 | 457 |
Net adjustment for fair value of hedge derivatives (A) | 502 | 134 |
Foreign Currency Cash Flow Hedge Gain (Loss) Reclassified to Earnings, Net | 29 | 348 |
Other comprehensive income (loss) | 1,166 | 591 |
Comprehensive income (loss) | $ (8,842) | $ (2,374) |
Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets Parenthetical - $ / shares shares in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Balance Sheet Parenthetical [Abstract] | ||
Common Stock, Par Value | $ 0 | $ 0 |
Common Stock, Shares Authorized | 100,000 | 100,000 |
Common Stock, Shares, Issued | 38,441 | 37,026 |
Common Stock, Shares, Outstanding | 38,441 | 37,026 |
Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | In October 2016, the FASB issued Accounting standards Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (''ASU 2016-16''). ASU 2016-16 modifies how intra-entity transfer of assets other than inventory are accounted for and presented in the financial statements. ASU 2016-16 is effective for public companies for annual reporting periods beginning after December 15, 2017. The Company adopted this ASU in the first quarter of 2017. The Company recognized a tax charge of approximately $2.0 million related to intra-entity transactions other than inventory which could not be previously recognized. The unrecognized tax charge is reflected as an adjustment to retained earnings. In March 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Shared-Based Payment Accounting (''ASU 2016-09''). ASU 2016-09 simplifies how several aspects of share-based payments are accounted for and presented in the financial statements. ASU 2016-09 is effective for public companies for annual reporting periods beginning after December 15, 2016. The Company adopted this ASU in the first quarter of 2017. Upon adoption, the Company no longer uses a forfeiture rate in the calculation of stock based compensation expense. The impact of this election did not result in a significant charge to retained earnings from applying an estimated forfeiture rate in previous periods. The balance of the unrecognized excess tax benefits was reversed with the impact recorded to retained earnings and included changes to the valuation allowance as a result of the adoption. The Company has excess tax benefits for which a benefit could not be previously recognized of approximately $4.5 million. Due to the full valuation allowance on the U.S. deferred tax assets, there was no impact to the financial statements beyond disclosure as a result of this adoption. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet and aligns many of the underlying principles of the new lessor model with those in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the requirements of ASU 2016-02 and has not yet determined its impact on the condensed consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," which is the new comprehensive revenue recognition standard that will supersede all existing revenue recognition guidance under U.S. GAAP. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to a customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which was issued in August 2015, revised the effective date for this ASU to annual and interim periods beginning on or after December 15, 2017, with early adoption permitted, but not earlier than the original effective date of annual and interim periods beginning on or after December 15, 2016, for public entities. The new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures. The Company does not plan to early adopt this new standard, and accordingly, the Company will adopt the new standard effective January 1, 2018. The Company currently plans to adopt using the modified retrospective approach. However, a decision regarding the adoption method has not been finalized at this time. The final determination will depend on a number of factors, such as the significance of the impact of the new standard on financial results, system readiness and the Company's ability to accumulate and analyze the information necessary to assess the impact on prior period financial statements, as necessary. The Company's evaluation of the impact of the new standard on the Company's accounting policies, processes, and system requirements is ongoing. While the Company continues to assess all potential impacts under the new standard, the Company does not believe there will be significant changes to the timing of recognition of hardware sales, software license sales or service contracts. As part of the Company's preliminary evaluation, the Company also considered the impact of the guidance in ASC 340-40, "Other Assets and Deferred Costs; Contracts with Customers". This guidance requires the capitalization of all incremental costs that we incur to obtain a contract with a customer that the Company would not have incurred if the contract had not been obtained, provided the Company expects to recover the costs. The Company preliminarily believes that there will not be significant changes to the timing of the recognition of sales commissions since the Company's commission plan is earned based on the recognition of revenue; however, there is a potential that the amortization period for commission costs may be longer than the contract term in some cases, as the new cost guidance requires entities to determine whether the costs relate to specific anticipated contracts as well. While the Company continues to assess the potential impacts of the new standard, including the areas described above, the Company cannot reasonably estimate quantitative information related to the impact of the new standard on its financial statements at this time. Immaterial Revision to Prior Period Financial Statement The Company has revised the presentation of revenue and cost of sales to separately present those amounts that are associated with service and related activities from those amounts associated with product sales. This change does not impact the Company’s previously reported total revenues, gross margin, loss from operations or net loss for the periods presented. |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures | Fair Value of Financial Instruments Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company measures at fair value certain financial assets and liabilities. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair-value hierarchy: Level 1— Quoted prices for identical instruments in active markets; Level 2— Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and Level 3— Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Foreign currency forward contracts are measured at fair value using models based on observable market inputs such as foreign currency exchange rates; therefore, they are classified within Level 2 of the valuation hierarchy. The following table summarizes the fair value measurements for the Company's financial instruments (in thousands):
|
Accounts Receivable and Other Receivables |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable and Other Receivables | Accounts Receivable and Other Receivables Accounts receivable consists of sales to the Company's customers which are generally based on standard terms and conditions. Accounts receivable balances consisted of the following (in thousands):
As of March 31, 2017 and December 31, 2016, the balance in other receivables was $3.4 million and $4.2 million. Other receivables consisted primarily of non-trade receivables including inventory sold to the Company's contract manufacturing partner or other integration partners (on which the Company does not recognize revenue) and net receivables for value-added taxes. |
Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure | Inventories Inventories consisted of the following (in thousands):
Consigned inventory is held at third-party locations, which include the Company's contract manufacturing partner and customers. The Company retains title to the inventory until purchased by the third-party. Consigned gross inventory, consisting of raw materials and finished goods was $11.6 million and $11.8 million at March 31, 2017 and December 31, 2016. The Company’s consignment inventory with its contract manufacturer consists of inventory transferred from the Company’s prior contract manufacturer as well as inventory that has been purchased by the contract manufacturer as a result of the Company's forecasted demand. The Company was contractually obligated to purchase inventory transferred from the Company's prior contract manufacturer after the inventory ages for 365 days. All transferred inventory not consumed was repurchased by the Company in 2016. The Company is also contractually obligated to purchase inventory that has been purchased by its contract manufacturer as a result of the Company's forecasted demand when the inventory ages beyond 180 days and has no forecasted demand. The Company’s consigned inventory at its contract manufacturing partner was $11.6 million and $11.8 million as of March 31, 2017 and December 31, 2016. The Company records a liability for adverse purchase commitments of inventory owned by its contract manufacturing partner. See Note 7 - Commitments and Contingencies for additional information regarding the Company's adverse purchase commitment liability. The Company recorded the following charges associated with the valuation of inventory and the adverse purchase commitment liabilities (in thousands):
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Restructuring and Other Charges |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Other Charges | Restructuring and Other Charges The following table summarizes the Company's restructuring and other charges as presented in the Condensed Consolidated Statement of Operations (in thousands):
Restructuring and other charges includes expenses incurred for employee terminations due to a reduction of personnel resources resulting from modifications of business strategy or business emphasis. Employee-related restructuring expenses include severance benefits, notice pay and outplacement services. Restructuring and other charges may also include expenses incurred associated with acquisition or divestiture activities, facility abandonments and other expenses associated with business restructuring actions. For the three months ended March 31, 2017, the Company recorded the following restructuring charges:
For the three months ended March 31, 2016, the Company recorded the following restructuring and other charges:
Accrued restructuring, which is included in other accrued liabilities in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016, consisted of the following (in thousands):
The Company evaluates the adequacy of the accrued restructuring charges on a quarterly basis. Reversals are recorded in the period in which the Company determines that expected restructuring obligations are less than the amounts accrued. |
Short-Term Borrowings |
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Short-term Debt [Abstract] | |||||||||||||||||||||||||||||||||||||
Short-term Debt | Short-Term Borrowings Silicon Valley Bank On September 19, 2016, the Company entered into a Credit Agreement (as amended, the “Credit Agreement”) with Silicon Valley Bank (“SVB”), as administrative agent, and the other lenders party thereto. The Credit Agreement replaces the Company’s Third Amended and Restated Loan and Security Agreement with SVB, dated March 14, 2014 (as amended, the “2014 Agreement”). On January 5, 2017, the Company entered into the First Amendment to the Credit Agreement. The following takes into account the terms per the agreement as amended on January 5, 2017. The Credit Agreement provides for a revolving loan commitment of $55.0 million and has a stated maturity date of September 19, 2019. The Credit Agreement includes a $10.0 million sub-limit for swingline loans and a $10.0 million sub-limit for letters of credit. The Credit Agreement also includes an accordion feature that allows the Company, at any time, to increase the aggregate revolving loan commitments by up to an additional $25.0 million, subject to the satisfaction of certain conditions, including obtaining the lenders’ agreement to participate in the increase. Borrowings under the Credit Agreement are subject to a borrowing base, which is a formula based upon certain eligible accounts receivable plus up to $7.5 million if the Company’s Liquidity (as defined in the Credit Agreement) is above $20.0 million in the first and second month of any fiscal quarter and $25.0 million for the last month of a fiscal quarter, measured as of the last day of the applicable month. Eligible accounts receivable include 85% of certain U.S. and 75% of certain foreign accounts receivable (85% in certain cases). The Credit Agreement also provides for non-formula advances during the last business day of any fiscal quarter, provided that Liquidity on the date of a requested non-formula advance must be greater than or equal to $40.0 million, the non-formula advance must be repaid on or before the first business day after the applicable fiscal quarter end, and subject to the satisfaction of certain other conditions. Outstanding borrowings under the revolving loan commitment bear interest at a per annum rate based upon the Company's Availability (as defined in the Credit Agreement), which means the quotient of the amount available for borrowings under the Credit Agreement divided by the lesser of the total commitment and the borrowing base, calculated as a daily average over the immediately preceding fiscal month. The Credit Agreement provides that the per annum interest rate on or before March 31, 2017 and at any time thereafter when the Consolidated Adjusted EBITDA (as defined in the Credit Agreement) as measured on a trailing twelve-month basis for the immediately preceding fiscal quarter period is less than the Consolidated Adjusted EBITDA threshold as specified in the Credit Agreement will be as follows:
After March 31, 2017, if Consolidated Adjusted EBITDA as measured on a trailing twelve-month basis for the immediately preceding fiscal quarter period is equal to or greater than the Consolidated Adjusted EBITDA threshold as specified in the Credit Agreement, the rate per annum will be as follows:
Under the Credit Agreement, the Company is required to make interest payments monthly. The Company is further required to pay $25,000 in annual administrative fees, $82,500 in annual commitment fees and a commitment fee based on the average unused portion of the revolving credit commitment, and certain other fees in connection with letters of credit. The commitment fee is determined as follows and is payable quarterly in arrears:
The Company paid a total of $0.3 million loan origination fees which were capitalized and will be expensed over the term of the Credit Agreement. If the Company reduces or terminates the revolving loan commitment under the Credit Agreement prior to September 19, 2017, the Company is required to pay a cancellation fee equal to 0.75% of the total revolving loan commitment. The Credit Agreement requires that the Company comply with financial covenants requiring the Company to maintain a minimum monthly Liquidity of $15.0 million as of the last day of the first and second month of any fiscal quarter and $20.0 million as of the last day of the third month of any fiscal quarter. Additionally, the Credit Agreement requires the Company to maintain a minimum trailing twelve months Consolidated Adjusted EBITDA each quarter of fiscal year 2017. The Credit Agreement also provides that following fiscal year 2017, SVB, as administrative agent, and the required lenders under the Credit Agreement will re-set the required minimum Consolidated Adjusted EBITDA levels for the periods tested in fiscal years 2018 and 2019. All obligations under the 2016 Agreement are unconditionally guaranteed by the Company's wholly owned subsidiary, Radisys International LLC. The obligations under the Credit Agreement are secured by a first priority lien on the assets of the Company and the subsidiary guarantor. If the Company acquires or forms a material U.S. subsidiary, then that subsidiary will also be required to guarantee the obligations under the Credit Agreement and grant a first priority lien on its assets. As of March 31, 2017 and December 31, 2016, the Company had an outstanding balance of $40.0 million and $25.0 million under the Credit Agreement. At March 31, 2017, the Company had $3.9 million of total borrowing availability remaining under the Credit Agreement. Under the First Amendment, the Company may borrow up to $55.0 million at fiscal quarter ends. The Company's gross borrowing availability was $43.9 million excluding the quarter end non-formula availability. At March 31, 2017, the Company was in compliance with all covenants under the Amended Agreement. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure | Commitments and Contingencies Adverse Purchase Commitments The Company is contractually obligated to reimburse its contract manufacturer for the cost of excess inventory used in the manufacture of the Company's products if there is no alternative use. Estimates for adverse purchase commitments are derived from reports received on a quarterly basis from the Company's contract manufacturer. Increases to this liability are charged to cost of sales. If and when the Company takes possession of inventory reserved for in this liability, the liability is transferred from other accrued liabilities to the excess and obsolete inventory valuation allowance (Note 4 —Inventories and Deferred Cost of Sales). The adverse purchase commitment liability is included in other accrued liabilities in the accompanying Condensed Consolidated Balance Sheets and was $0.5 million and $0.3 million as of March 31, 2017 and December 31, 2016. Guarantees and Indemnification Obligations As permitted under Oregon law, the Company has agreements whereby it indemnifies its officers, directors and certain finance employees for certain events or occurrences while an officer, director or employee is or was serving in such capacity at the request of the Company. The term of the indemnification period is for the officer's, director's or employee's lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a Director and Officer insurance policy that limits its exposure and enables the Company to recover a portion of any future amounts paid. To date, the Company has not incurred any costs associated with these indemnification agreements and, as a result, management believes the estimated fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of March 31, 2017. The Company enters into standard indemnification agreements in its ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company's business partners or customers, in connection with patent, copyright or other intellectual property infringement claims by any third party with respect to the Company's current products, as well as claims relating to property damage or personal injury resulting from the performance of services by us or the Company's subcontractors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is generally limited. Historically, the Company's costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal. Accrued Warranty The Company provides for the estimated cost of product warranties at the time it recognizes revenue. Products are generally sold with warranty coverage for a period of 12 or 24 months after shipment. Parts and labor are covered under the terms of the warranty agreement. The workmanship of the Company’s products produced by the contract manufacturer is covered under warranties provided by the contract manufacturer for 12 to 24 months. The warranty provision is based on historical experience by product family. The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its components suppliers; however ongoing failure rates, material usage and service delivery costs incurred in correcting product failure, as well as specific product class failures out of the Company’s baseline experience, affect the estimated warranty obligation. If actual product failure rates, material usage or service delivery costs differ from estimates, revisions to the estimated warranty liability would be required. The following is a summary of the change in the Company's warranty accrual reserve (in thousands):
At March 31, 2017 and December 31, 2016, $1.4 million and $1.5 million of the warranty liability balance was included in other accrued liabilities and $0.3 million and $0.4 million was included in other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets. |
Basic and Diluted Net Income (Loss) Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Text Block] | Basic and Diluted Net Loss per Share A reconciliation of the numerator and the denominator used to calculate basic and diluted net loss per share is as follows (in thousands, except per share amounts):
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Income Taxes |
3 Months Ended |
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Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Tax Disclosure | Income Taxes The Company's effective tax rate for the three months ended March 31, 2017 differs from the statutory rate due to a full valuation allowance provided against its United States (“U.S.”) net deferred tax assets, and taxes on foreign income that differ from the U.S. tax rate. The Company utilizes the asset and liability method of accounting for income taxes. The Company records deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon the Company's review of all positive and negative evidence, including its three year U.S. cumulative pre-tax book loss and taxable loss, it concluded that a full and a partial valuation allowance should continue to be recorded against its U.S. and Canadian net deferred tax assets at March 31, 2017. In certain other foreign jurisdictions, where the Company does not have cumulative losses or other negative evidence, the Company had net deferred tax assets of $1.0 million and $1.1 million at March 31, 2017 and December 31, 2016. In the future, if the Company determines that it is more likely than not that it will realize its U.S. and Canadian net deferred tax assets, it will reverse the applicable portion of the valuation allowance and recognize an income tax benefit in the period in which such determination is made. The ending balance for the unrecognized tax benefits for uncertain tax positions was approximately $3.5 million at March 31, 2017. The related interest and penalties were $0.8 million and $0.3 million. The uncertain tax positions that are reasonably possible to decrease in the next twelve months are insignificant. The Company is currently under tax examination in India. The periods covered under examination are the Company's financial years 2005, 2006, 2008 and 2011. The examinations are in various stages of appellate proceedings and all material uncertain tax positions associated with the examination have been taken into account in the ending balance of the unrecognized tax benefits at March 31, 2017. The Company is currently under tax examination in Canada. The periods covered under examination in Canada are the Company's financial years 2013 and 2014. No examination adjustments have been proposed. As of March 31, 2017, the Company is not under examination by tax authorities in any other jurisdictions. |
Stock-based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments | Stock-based Compensation The following table summarizes awards granted under the Radisys Corporation 2007 and LTIP Stock Plans (in thousands):
On March 28, 2016, the Compensation Committee approved grants of PRSUs to certain senior executives. The PRSUs will vest only on satisfaction of certain annual performance criteria during the performance period beginning on the grant date. Specifically, 50% of shares will vest on meeting targets of strategic revenue during fiscal year 2016 and 50% of shares will vest on meeting targets of strategic revenue during fiscal year 2017, subject to the attainment of achieving certain operating income thresholds defined by the Company's ratified 2017 annual operating plans. The awards have two separate annual performance achievement periods in 2016 and 2017 and vest upon attainment and approval of the respective performance conditions. The awards associated with strategic revenue targets in 2016 were earned and settled in shares in the three month period ended March 31, 2017. Stock-based compensation was recognized and allocated as follows (in thousands):
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Hedging |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Text Block] | Hedging The Company’s activities expose it to a variety of market risks, including the effects of changes in foreign currency exchange rates. The Company manages these risks through the use of forward exchange contracts, designated as foreign-currency cash flow hedges, in an attempt to reduce the potentially adverse effects of foreign currency exchange rate fluctuations that occur in the normal course of business. As such, the Company’s hedging activities are employed solely for risk management purposes. All hedging transactions are conducted with, in the opinion of management, financially stable and reputable financial institutions. As of March 31, 2017 and December 31, 2016, the only hedge instruments executed by the Company are associated with its exposure to fluctuations in the Indian Rupee, which result from obligations such as payroll and rent paid in this currency. These derivatives are recognized on the balance sheet at their fair value. Unrealized gain positions are recorded as other current assets and unrealized loss positions are recorded as other current liabilities. Changes in the fair values of the outstanding derivatives that are highly effective are recorded in other comprehensive income until net income (loss) is affected by the variability of the cash flows of the hedged transaction. Typically, hedge ineffectiveness could result when the amount of the Company’s hedge contracts exceed the Company’s forecasted or actual transactions for which the hedge contracts were designed to hedge. Once a hedge contract matures, the associated gain (loss) on the contract will remain in other comprehensive income (loss) until the underlying hedged transaction affects net income (loss), at which time the gain (loss) will be reclassified out of accumulated other comprehensive income (loss) and recorded to the expense line item being hedged. The Company only enters into derivative contracts in order to hedge foreign currency exposure, and these contracts do not exceed two years from inception. If the Company entered into a contract for speculative reasons or if the Company’s current hedge position becomes ineffective, changes in the fair values of the derivatives would be recognized in earnings in the current period. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives are expected to remain highly effective in future periods. For the three months ended March 31, 2017 and 2016, the Company had no hedge ineffectiveness. During the three months ended March 31, 2017 the Company entered into 6 new foreign currency forward contracts, with total contractual values of $3.6 million. During the three months ended March 31, 2016, the Company entered into 12 new foreign currency contracts, with total contractual values of $3.6 million. A summary of the aggregate contractual or notional amounts, balance sheet location and estimated fair values of derivative financial instruments designated as cash flow hedges at March 31, 2017 is as follows (in thousands):
A summary of the aggregate contractual or notional amounts, balance sheet location and estimated fair values of derivative financial instruments designated as cash flow hedges at December 31, 2016 is as follows (in thousands):
The following table summarizes the effect of derivative instruments on the consolidated financial statements as a loss (gain) as follows (in thousands):
The following is a summary of changes to comprehensive income (loss) associated with the Company's hedging activities (in thousands):
Over the next twelve months, the Company expects to reclassify into earnings income of approximately $0.4 million currently recorded as accumulated other comprehensive income, as a result of the maturity of currently held forward exchange contracts. The bank counterparties in these contracts expose the Company to credit-related losses in the event of their nonperformance. However, to mitigate that risk, the Company only contracts with counterparties who meet its minimum requirements regarding counterparty credit worthiness. In addition, the Company monitors credit ratings, credit spreads and potential downgrades prior to entering into any new hedging contracts. |
Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Disclosure | Segment Information The Company is made up of two operating segments: Software-Systems and Hardware Solutions. The Company's Chief Executive Officer, or chief operating decision maker, regularly reviews discrete financial information for purposes of allocating resources and assessing the performance of each segment:
Cost of sales, research and development and selling, general and administrative expenses are allocated to Software-Systems and Hardware Solutions. Expenses, reversals, gains and losses not allocated to Software-Systems or Hardware Solutions include amortization of acquired intangible assets, stock-based compensation, restructuring and other charges, and other one-time non-recurring events. These items are allocated to corporate and other. The Company recorded the following revenues, gross margin and income (loss) from operations by operating segment for the three months ended March 31, 2017 and 2016 (in thousands):
Assets are not allocated to segments for internal reporting purposes. A portion of depreciation is allocated to the respective segment. It is impracticable for the Company to separately identify the amount of depreciation by segment that is included in the measure of segment profit or loss. Revenues by geographic area were as follows (in thousands):
Long-lived assets by geographic area are as follows (in thousands):
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Significant Accounting Policies Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Use of Estimates, Policy [Policy Text Block] | The preparation of these statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Additionally, the accompanying financial data as of March 31, 2017 and for the three months ended March 31, 2017 and 2016 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. |
Fair Value of Financial Instruments (Tables) |
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Fair Value Measurements, Recurring and Nonrecurring [Table Text Block] |
The following table summarizes the fair value measurements for the Company's financial instruments (in thousands):
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Accounts Receivable and Other Receivables (Tables) |
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Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block] | Accounts receivable balances consisted of the following (in thousands):
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Inventories (Tables) |
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory, Current [Table Text Block] | Inventories consisted of the following (in thousands):
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Charges Associated with Inventory [Table Text Block] | The Company recorded the following charges associated with the valuation of inventory and the adverse purchase commitment liabilities (in thousands):
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Restructuring and Other Charges (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring and Related Costs [Table Text Block] | The following table summarizes the Company's restructuring and other charges as presented in the Condensed Consolidated Statement of Operations (in thousands):
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Schedule of Restructuring Reserve by Type of Cost [Table Text Block] | Accrued restructuring, which is included in other accrued liabilities in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016, consisted of the following (in thousands):
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Commitments and Contingencies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Product Warranty Liability [Table Text Block] | The following is a summary of the change in the Company's warranty accrual reserve (in thousands):
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Basic and Diluted Net Income (Loss) Per Share (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 |
Mar. 31, 2016 |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] |
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Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] | A reconciliation of the numerator and the denominator used to calculate basic and diluted net loss per share is as follows (in thousands, except per share amounts):
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Stock-based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity awards granted during the period,Grants in Period, Gross [Table Text Block] | The following table summarizes awards granted under the Radisys Corporation 2007 and LTIP Stock Plans (in thousands):
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Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block] | Stock-based compensation was recognized and allocated as follows (in thousands):
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Hedging (Tables) |
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] | A summary of the aggregate contractual or notional amounts, balance sheet location and estimated fair values of derivative financial instruments designated as cash flow hedges at December 31, 2016 is as follows (in thousands):
A summary of the aggregate contractual or notional amounts, balance sheet location and estimated fair values of derivative financial instruments designated as cash flow hedges at March 31, 2017 is as follows (in thousands):
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Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location [Table Text Block] | A summary of the aggregate contractual or notional amounts, balance sheet location and estimated fair values of derivative financial instruments designated as cash flow hedges at March 31, 2017 is as follows (in thousands):
A summary of the aggregate contractual or notional amounts, balance sheet location and estimated fair values of derivative financial instruments designated as cash flow hedges at December 31, 2016 is as follows (in thousands):
The following table summarizes the effect of derivative instruments on the consolidated financial statements as a loss (gain) as follows (in thousands):
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Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss) [Table Text Block] | The following is a summary of changes to comprehensive income (loss) associated with the Company's hedging activities (in thousands):
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from External Customers by Products and Services [Table Text Block] |
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Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block] |
Long-lived assets by geographic area are as follows (in thousands):
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Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block] |
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Schedules of Concentration of Risk, by Risk Factor [Table Text Block] |
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Significant Accounting Policies Significant Accounting Policies (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2017 |
Mar. 31, 2016 |
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New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Deferred Income Tax Expense (Benefit) | $ 195 | $ 12 |
Accounting Standards Update 2016-16 [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Cumulative Effect on Retained Earnings, Net of Tax | $ 2,000 | |
Accounting Standards Update 2016-09 [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Deferred Income Tax Expense (Benefit) | $ 4,500 |
Fair Value of Financial Instruments Fair Value Measurements (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
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Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign Currency Contract, Asset, Fair Value Disclosure | $ 0 | $ 0 |
Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign Currency Contract, Asset, Fair Value Disclosure | 846 | 94 |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign Currency Contract, Asset, Fair Value Disclosure | 0 | $ 0 |
Estimate of Fair Value, Fair Value Disclosure [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign Currency Contract, Asset, Fair Value Disclosure | $ 846 |
Accounts Receivable and Other Receivables (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
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Receivables [Abstract] | ||
Accounts Receivable, Gross | $ 49,980 | $ 38,433 |
Less: allowance for doubtful accounts | (55) | (55) |
Accounts Receivable, Net | 49,925 | 38,378 |
Other receivables | $ 3,446 | $ 4,161 |
Inventories (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
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Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
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Inventory Disclosure [Abstract] | |||
Inventory Charges, net (E&O and APC) | $ 501 | $ 266 | |
Inventory, Net [Abstract] | |||
Raw materials | 16,917 | $ 24,805 | |
Work-in-process | 0 | 12 | |
Finished goods | 3,924 | 5,005 | |
Inventory, Gross | 20,841 | 29,822 | |
Less: inventory valuation allowance | (9,996) | (9,801) | |
Inventories, net | 10,845 | 20,021 | |
Other Inventory, Materials, Supplies and Merchandise under Consignment, Gross | $ 11,600 | 11,800 | |
Age of consignment inventory purchased by contract manufacturer | 365 days | ||
Age of consignment inventory purchased as a result of forecasted demand | 180 days | ||
Inventory Charges, Inventory Valuation, Deposit And Adverse Purchase Commitment Liability | $ 702 | 545 | |
Adverse Purchase Commitments | 201 | $ 279 | |
Inventory for Long-term Contracts or Programs, Gross | $ 11,600 | $ 11,800 |
Restructuring and Other Charges (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2017 |
Mar. 31, 2016 |
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Restructuring Cost and Reserve [Line Items] | ||
Restructuring Charges | $ 42 | |
Business Combination, Integration Related Costs | 193 | $ 0 |
Severance Costs, net | (682) | |
Restructuring and acquisition-related charges, net | 235 | $ 682 |
Other Expense [Member] | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring Charges | $ 100 |
Restructuring and Other Charges - Restructuring Reserve Rollforward (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2017 |
Mar. 31, 2016 |
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Restructuring Cost and Reserve [Line Items] | ||
Severance Costs | $ 42 | |
Business Combination, Integration Related Costs | 193 | $ 0 |
Balance accrued as of December 31, 2013 | 1,437 | |
Restructuring Charges | 156 | |
Restructuring Reserve, Accrual Adjustment | (114) | |
Expenditures | (1,166) | |
Balance accrued as of September 30, 2014 | 313 | |
Severance, Payroll Taxes and Other Employee Benefits [Member] | ||
Restructuring Cost and Reserve [Line Items] | ||
Balance accrued as of December 31, 2013 | 1,347 | |
Restructuring Charges | 156 | |
Restructuring Reserve, Accrual Adjustment | (114) | |
Expenditures | (1,136) | |
Balance accrued as of September 30, 2014 | 253 | |
Lease Abandonment Charges [Member] | ||
Restructuring Cost and Reserve [Line Items] | ||
Balance accrued as of December 31, 2013 | 90 | |
Restructuring Charges | 0 | |
Restructuring Reserve, Accrual Adjustment | 0 | |
Expenditures | (30) | |
Balance accrued as of September 30, 2014 | $ 60 |
Commitments and Contingencies (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
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Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
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Movement in Standard Product Warranty Accrual [Roll Forward] | |||
Warranty liability balance, beginning of the period | $ 1,821 | $ 2,553 | |
Product warranty accruals | 223 | 385 | |
Utilization of accrual | (315) | (603) | |
Warranty liability balance, end of the period | 1,729 | $ 2,335 | |
Product Warranty Accrual, Current | 1,400 | $ 1,500 | |
Product Warranty Accrual, Noncurrent | $ 300 | $ 400 | |
Minimum [Member] | |||
Product Warranty Liability [Line Items] | |||
Warranty, Term | 12 months | ||
Maximum [Member] | |||
Product Warranty Liability [Line Items] | |||
Warranty, Term | 24 months |
Commitments and Contingencies Adverse Purchase Commitments Liability (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Commitments and Contingencies Disclosure - APC liability [Abstract] | ||
Purchase Commitment, Remaining Minimum Amount Committed | $ 0.5 | $ 0.3 |
Basic and Diluted Net Income (Loss) Per Share - Earnings (Loss) Per Share Calculation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
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Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
Net income (loss) | $ (10,008) | $ (2,965) |
Weighted average shares used to calculate net income (loss) per share, basic | 38,715 | 37,007 |
Weighted average shares used to calculate net income (loss) per share, diluted | 38,715 | 37,007 |
Basic (in dollars per share) | $ (0.26) | $ (0.08) |
Diluted (in dollars per share) | $ (0.26) | $ (0.08) |
Restricted Stock Units (RSUs) [Member] | ||
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
Effect of dilutive equity awards | 0 | 0 |
Stock Options [Member] | ||
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
Effect of dilutive equity awards | 0 | 0 |
Basic and Diluted Net Income (Loss) Per Share - Anti-Dilutive Securities (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
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Restricted Stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 541 | 122 |
Securities Excluded from Computation of Earnings Per Share, Performance Target Not Met, Amount | 1,049 | 2,305 |
Stock Compensation Plan [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 5,417 | 5,235 |
Stock Options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 3,827 | 2,808 |
Income Taxes (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Deferred Tax Assets, Net | $ 1.0 | $ 1.1 |
Unrecognized Tax Benefits | 3.5 | |
Unrecognized Tax Benefits, Interest on Income Taxes Accrued | 0.8 | |
Unrecognized Tax Benefits, Income Tax Penalties Accrued | $ 0.3 |
Stock-based Compensation - Equity Awards (Details) - 2007 Stock Plan [Member] - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock options, grants in period | 0 | 1,036 |
Total grants in period | 1,137 | 1,716 |
Restricted Stock Units (RSUs) [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity instruments other than options, grants in period | 467 | 0 |
Performance Shares [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage | 50.00% | |
Equity instruments other than options, grants in period | 670 | 680 |
Stock-based Compensation - Stock Based Compensation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated Share-based Compensation Expense | $ 1,154 | $ 688 |
Cost of Sales [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated Share-based Compensation Expense | 97 | 46 |
Research and Development Expense [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated Share-based Compensation Expense | 230 | 153 |
Selling, General and Administrative Expenses [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated Share-based Compensation Expense | $ 827 | $ 489 |
Segment Information - Product and Service and Product Group (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
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Revenue from External Customer [Line Items] | ||
Revenues | $ 37,610 | $ 55,146 |
Europe, the Middle East and Africa [Member] | ||
Revenue from External Customer [Line Items] | ||
Revenues | $ 9,020 | $ 9,685 |
Segment Information - Revenue by Major Customer (Details) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2015 |
|
Customer A [Domain] | |||
Revenue, Major Customer [Line Items] | |||
Entity-Wide Revenue, Major Customer, Percentage | 41.20% | 42.30% | |
Customer B [Domain] | |||
Revenue, Major Customer [Line Items] | |||
Entity-Wide Revenue, Major Customer, Percentage | 15.00% | 14.30% | |
Accounts Receivable [Member] | Customer A [Domain] | |||
Revenue, Major Customer [Line Items] | |||
Entity-Wide Revenue, Major Customer, Percentage | 37.70% | 10.40% | |
Accounts Receivable [Member] | Customer B [Domain] | |||
Revenue, Major Customer [Line Items] | |||
Entity-Wide Revenue, Major Customer, Percentage | 15.40% |
Segment Information - Accounts Receivable (Details) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2015 |
|
Customer D [Domain] | Accounts Receivable [Member] | |||
Concentration Risk [Line Items] | |||
Entity-Wide Revenue, Major Customer, Percentage | 24.00% | 32.60% | |
Customer B [Domain] | |||
Concentration Risk [Line Items] | |||
Entity-Wide Revenue, Major Customer, Percentage | 15.00% | 14.30% | |
Customer B [Domain] | Accounts Receivable [Member] | |||
Concentration Risk [Line Items] | |||
Entity-Wide Revenue, Major Customer, Percentage | 15.40% | ||
Customer A [Domain] | |||
Concentration Risk [Line Items] | |||
Entity-Wide Revenue, Major Customer, Percentage | 41.20% | 42.30% | |
Customer A [Domain] | Accounts Receivable [Member] | |||
Concentration Risk [Line Items] | |||
Entity-Wide Revenue, Major Customer, Percentage | 37.70% | 10.40% |
Segment Information Operating Segment (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Segment Reporting Information [Line Items] | ||
Operating Income (Loss) | $ (9,135) | $ (2,450) |
Gross Profit | 8,222 | 12,784 |
Revenues | 37,610 | 55,146 |
Operating Segments [Member] | Software-Systems [Member] | ||
Segment Reporting Information [Line Items] | ||
Operating Income (Loss) | (3,273) | 780 |
Gross Profit | 5,465 | 8,788 |
Revenues | 10,149 | 14,059 |
Operating Segments [Member] | Embedded Products and Hardware Services [Member] | ||
Segment Reporting Information [Line Items] | ||
Operating Income (Loss) | (1,286) | 1,327 |
Gross Profit | 4,781 | 5,969 |
Revenues | 27,461 | 41,087 |
Corporate, Non-Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Operating Income (Loss) | (4,576) | (4,557) |
Gross Profit | $ (2,024) | $ (1,973) |
4
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