UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
______________
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of Report (Date of earliest event reported): January 31, 2012
RADISYS
CORPORATION
(Exact
name of registrant as specified in its charter)
Oregon |
0-26844 |
93-0945232 |
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
5435 NE Dawson Creek Drive |
97124 |
|
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s
telephone number, including area code: (503) 615-1100
No
Change
(Former
Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
TABLE OF CONTENTS
Item 2.02. Results of Operations and Financial Condition.
Item
9.01. Financial Statements and Exhibits.
SIGNATURE
EXHIBIT
INDEX
EXHIBIT 99.1
Item 2.02. Results of Operations and Financial Condition.
The information in this Item 2.02 and the Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or any proxy statement or report or other document we may file with the Securities Exchange Commission (“SEC”), regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such filing.
On January 31, 2012, Radisys Corporation (the “Company” or "Radisys") issued a press release announcing its results for the fiscal quarter ended December 31, 2011. A copy of this press release is attached hereto as Exhibit 99.1.
The Company’s press release contains forward-looking statements, including statements about the Company’s business strategy, financial outlook, expectations for the first quarter of 2012 and the full year 2012, and items related to the acquisition of Continuous Computing such as certain royalty revenues, earn-out payments, expected synergies and other expense savings and operational and administrative efficiencies, revenue growth, margin improvement, accretion to earnings, financial performance, management changes and other attributes of the Company following the acquisition. Actual results could differ materially from the outlook guidance and expectations in these forward-looking statements as a result of a number of risk factors, including, among others, (a) the Company’s dependence on certain customers and high degree of customer concentration, (b) the Company’s use of one contract manufacturer for a significant portion of the production of its products, (c) the anticipated amount and timing of revenues from design wins due to the Company’s customers’ product development time, cancellations or delays, (d) the ability of the Company to successfully integrate the business and operations of Continuous Computing and higher than expected costs of integration, (e) performance and customer acceptance of the Trillium line of products, (f) the combined Company’s financial results and performance and (g) other factors listed in the Company’s reports filed with the Securities and Exchange Commission (SEC), including those listed under “Risk Factors” in Radisys’ Annual Report on Form 10-K for the year ended December 31, 2010 and in Radisys’ subsequent Quarterly Reports on Form 10-Q, copies of which may be obtained by contacting the Company at 503-615-1100, from the Company’s investor relations web site at http://investor.radisys.com/, or at the SEC’s website at http://www.sec.gov. Although forward-looking statements help provide additional information about Radisys, investors should keep in mind that forward-looking statements are inherently less reliable than historical information. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. All information in this press release is as of January 31, 2012. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
To supplement its consolidated financial statements in accordance with generally accepted accounting principles (GAAP), the Company's earnings release contains non-GAAP financial measures that exclude certain expenses, gains and losses, such as the effects of (a) purchase accounting adjustments, (b) amortization of acquired intangible assets, (c) stock-based compensation expense recognized as a result of the Company’s adoption of FAS 123R (now codified at FASB ASC Topic 718), (d) restructuring and acquisition-related charges, net (reversals), (e) gain on the liquidation of a foreign subsidiary, (f) tax contingency adjustments, and (g) income taxes effect of reconciling items. The Company believes that the use of non-GAAP financial measures provides useful information to investors to gain an overall understanding of its current financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that the Company believes are not indicative of its core operating results. In addition, non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring the Company's performance, and the Company believes that it is providing investors with financial measures that most closely align to its internal measurement processes. These non-GAAP measures are considered to be reflective of the Company’s core operating results as they more closely reflect the essential revenue-generating activities of the Company and direct operating expenses (resulting in cash expenditures) needed to perform these revenue-generating activities. The Company also believes, based on feedback provided to the Company during its earnings calls' Q&A sessions and discussions with the investment community, that the non-GAAP financial measures it provides are necessary to allow the investment community to construct their valuation models to better align its results and projections with its competitors and market sector, as there is significant variability and unpredictability across companies with respect to certain expenses, gains and losses.
The non-GAAP financial information is presented using consistent methodology from quarter-to-quarter and year-to-year. These measures should be considered in addition to results prepared in accordance with GAAP. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP financial measures.
A reconciliation of non-GAAP information to GAAP information is included in the table set forth in the press release. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and reconciliations between GAAP and non-GAAP financial measures included in this earnings release should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are furnished with this report on Form 8-K:
Exhibit | ||
Number |
|
Description |
99.1 | Press Release, dated January 31, 2012 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
RADISYS CORPORATION |
|||
Date: | January 31, 2012 | By: |
/s/ Brian Bronson |
Name: |
Brian Bronson |
||
Title: |
President and Chief Financial Officer |
EXHIBIT INDEX
Exhibit Number |
Description |
99.1 |
Press Release, dated January 31, 2012 |
Exhibit 99.1
Radisys Reports Fourth Quarter 2011 Results
HILLSBORO, Ore.--(BUSINESS WIRE)--January 31, 2012--Radisys® Corporation (NASDAQ: RSYS), a leading provider of embedded wireless infrastructure solutions for telecom, aerospace, defense and public safety applications, announced revenues for the fourth quarter of $79.5 million and non-GAAP revenue of $80.2 million, up $13.3 million or 20% on a non-GAAP basis when compared to the fourth quarter of 2010. Fourth quarter GAAP net loss was $6.7 million or $0.25 per share and non-GAAP net income was $1.4 million or $0.05 per diluted share. Fourth quarter non-GAAP results exclude the impact of purchase accounting adjustments, amortization of acquired intangible assets, stock-based compensation and restructuring and acquisition-related charges. A reconciliation of GAAP to non-GAAP results is located in the tables below.
Commenting on the fourth quarter results, Mike Dagenais, Radisys’ Chief Executive Officer stated, “Our fourth quarter revenue came in as we expected, and we exceeded our non-GAAP gross margin and EPS expectations with a higher mix of media server revenue. Our growing Next Generation Communications revenue is now on an annualized run-rate of over $200 million going into 2012 and represents nearly two thirds of total revenue. We also have significantly improved our customer diversification and our top customer comprised only 19% of total revenue in the fourth quarter. We had another fantastic design win quarter totaling approximately $95 million of expected revenue over the next five years, bringing our second half total to almost $200 million. Our customers are responding positively to our unique set of product and solution offerings and awarded us new business in many of our targeted wireless infrastructure applications such as network test, traffic management, video optimization, voice quality enhancement and military communications.”
Mr. Dagenais went on to say, “Our recently implemented strategy is focused on being the world’s premier provider of embedded wireless telecom solutions, and I am excited about the market’s early interest in our unique, fully integrated hardware and software capabilities. These unique integrated solutions, like our Security Gateway, provide more value to our customers, allow for more sustainable differentiation and return greater profitability to our stakeholders. Our strategy also entails re-investment for growth in our COMe and RMS businesses and additional investments in new target growth areas such as media server for video and voice over LTE. The integration of the two companies is proceeding as planned, and we continue to expect operating expense synergies of at least $8 to $10 million plus $5 million of cost of goods sold synergies in 2012.”
Fourth Quarter Financial Highlights
2011 Financial Highlights
Financial Outlook
Beginning in 2012, the Company will be changing its revenue reporting to more closely reflect how the Company views its revenue internally. Specifically, revenue will be disclosed in the following four product groups: ATCA Platforms, COM Express and Rackmount Server Products, Software and Solutions and Other Products. The total ATCA Platforms and Software and Solutions revenue represent the previously disclosed Next Generation Communications Networks revenue; COM Express and Rackmount Server revenue represent most of the previously disclosed Commercial Products revenue and Other Products revenue represents the previously disclosed Legacy Communications revenue as well as previously reported Commercial Products revenue that is not COM Express or Rackmount Server products. This new revenue reporting is included in the tables below for 2011 by quarter.
First Quarter 2012 Outlook
2012 Outlook
Conference Call and Web-cast Information
Radisys will host a conference call on Tuesday, January 31, 2012 at 5:00 p.m. ET to discuss the fourth quarter 2011 results, the financial and business outlook for the first quarter and the full year of 2012.
To participate in the live conference call, dial (888) 333-0027 in the U.S. and Canada or (706) 634-4990 for all other countries and reference conference ID#43051989. The live conference call will also be available via webcast on the Radisys investor relations website at http://investor.radisys.com/.
A replay of the conference call will be available two hours after the call is complete until 11:59 p.m. ET on Tuesday, February 14, 2012. To access the replay, dial (855) 859-2056 or (404) 537-3406 with conference ID#43051989. A replay of the webcast will be available for an extended period of time on the Radisys investor relations website at http://investor.radisys.com/.
Forward-Looking Statements
This press release contains forward-looking statements, including statements about the Company’s business strategy, financial outlook, expectations for the first quarter of 2012 and the full year 2012, and items related to the acquisition of Continuous Computing such as certain royalty revenues, earn-out payments, expected synergies and other expense savings and operational and administrative efficiencies, revenue growth, margin improvement, accretion to earnings, financial performance, management changes and other attributes of the Company following the acquisition. Actual results could differ materially from the outlook guidance and expectations in these forward-looking statements as a result of a number of risk factors, including, among others, (a) the Company’s dependence on certain customers and high degree of customer concentration, (b) the Company’s use of one contract manufacturer for a significant portion of the production of its products, (c) the anticipated amount and timing of revenues from design wins due to the Company’s customers’ product development time, cancellations or delays, (d) the ability of the Company to successfully integrate the business and operations of Continuous Computing and higher than expected costs of integration, (e) performance and customer acceptance of the Trillium line of products, (f) the combined Company’s financial results and performance and (g) other factors listed in the Company’s reports filed with the Securities and Exchange Commission (SEC), including those listed under “Risk Factors” in Radisys’ Annual Report on Form 10-K for the year ended December 31, 2010 and in Radisys’ subsequent Quarterly Reports on Form 10-Q, copies of which may be obtained by contacting the Company at 503-615-1100, from the Company’s investor relations web site at http://investor.radisys.com/, or at the SEC’s website at http://www.sec.gov. Although forward-looking statements help provide additional information about Radisys, investors should keep in mind that forward-looking statements are inherently less reliable than historical information. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. All information in this press release is as of January 31, 2012. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
Non-GAAP Financial Measures
To supplement its consolidated financial statements in accordance with generally accepted accounting principles (GAAP), the Company's earnings release contains non-GAAP financial measures that exclude certain expenses, gains and losses, such as the effects of (a) purchase accounting adjustments, (b) amortization of acquired intangible assets, (c) stock-based compensation expense recognized as a result of the Company’s adoption of FAS 123R (now codified at FASB ASC Topic 718), (d) restructuring and acquisition-related charges, net (reversals), (e) gain on the liquidation of a foreign subsidiary, (f) tax contingency adjustments, and (g) income taxes effect of reconciling items. The Company believes that the use of non-GAAP financial measures provides useful information to investors to gain an overall understanding of its current financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that the Company believes are not indicative of its core operating results. In addition, non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring the Company's performance, and the Company believes that it is providing investors with financial measures that most closely align to its internal measurement processes. These non-GAAP measures are considered to be reflective of the Company’s core operating results as they more closely reflect the essential revenue-generating activities of the Company and direct operating expenses (resulting in cash expenditures) needed to perform these revenue-generating activities. The Company also believes, based on feedback provided to the Company during its earnings calls' Q&A sessions and discussions with the investment community, that the non-GAAP financial measures it provides are necessary to allow the investment community to construct their valuation models to better align its results and projections with its competitors and market sector, as there is significant variability and unpredictability across companies with respect to certain expenses, gains and losses.
The non-GAAP financial information is presented using consistent methodology from quarter-to-quarter and year-to-year. These measures should be considered in addition to results prepared in accordance with GAAP. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP financial measures.
A reconciliation of non-GAAP information to GAAP information is included in the tables below. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and reconciliations between GAAP and non-GAAP financial measures included in this earnings release should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
About Radisys
Radisys (NASDAQ: RSYS) is a leading provider of embedded wireless infrastructure solutions for telecom, aerospace, defense and public safety applications. Radisys' market-leading ATCA, IP Media Server and Com Express platforms coupled with world-renowned Trillium software, services and market expertise enable customers to bring high-value products and services to market faster with lower investment and risk. Radisys solutions are used in a wide variety of 3G & 4G / LTE mobile network applications including: Radio Access Networks (RAN) solutions from femtocells to picocells and macrocells, wireless core network applications, Deep Packet Inspection (DPI) and policy management; conferencing and media services including voice, video and data, as well as customized mobile network applications that support the aerospace, defense and public safety markets.
Radisys® and Trillium® are registered trademarks of Radisys.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts, unaudited) |
|||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Revenues | $ | 79,506 | $ | 66,826 | $ | 330,865 | $ | 284,311 | |||||||
Cost of sales: | |||||||||||||||
Cost of sales | 51,975 | 43,826 | 225,752 | 190,915 | |||||||||||
Amortization of purchased technology | 2,738 | 1,164 | 8,348 | 6,182 | |||||||||||
Gross margin | 24,793 | 21,836 | 96,765 | 87,214 | |||||||||||
Operating expenses | |||||||||||||||
Research and development | 13,063 | 9,504 | 44,625 | 38,678 | |||||||||||
Selling, general and administrative | 15,202 | 11,502 | 52,722 | 45,532 | |||||||||||
Intangible assets amortization | 1,304 | 192 | 2,922 | 730 | |||||||||||
Restructuring and acquisition-related charges, net | 1,701 | 1,778 | 9,980 | 1,575 | |||||||||||
Gain on the liquidation of a foreign subsidiary | — | — | (2,081 | ) | — | ||||||||||
Income (loss) from operations | (6,477 | ) | (1,140 | ) | (11,403 | ) | 699 | ||||||||
Interest expense | (460 | ) | (457 | ) | (1,870 | ) | (2,035 | ) | |||||||
Other income (expense), net | 328 | (50 | ) | 612 | 482 | ||||||||||
Loss before income tax expense (benefit) | (6,609 | ) | (1,647 | ) | (12,661 | ) | (854 | ) | |||||||
Income tax expense (benefit) | 42 | 435 | (8,436 | ) | (485 | ) | |||||||||
Net loss | $ | (6,651 | ) | $ | (2,082 | ) | $ | (4,225 | ) | $ | (369 | ) | |||
Net loss per share: | |||||||||||||||
Basic | $ | (0.25 | ) | $ | (0.09 | ) | $ | (0.17 | ) | $ | (0.02 | ) | |||
Diluted (I) | $ | (0.25 | ) | $ | (0.09 | ) | $ | (0.17 | ) | $ | (0.02 | ) | |||
Weighted average shares outstanding | |||||||||||||||
Basic | 26,502 | 24,310 | 25,413 | 24,144 | |||||||||||
Diluted (I) | 26,502 | 24,310 | 25,413 | 24,144 | |||||||||||
(I) For all periods presented, the computation of diluted earnings per share excludes the effects of stock options, restricted stock units, escrow shares and the Company's 2013 convertible senior notes, as they are anti-dilutive. |
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CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, unaudited) |
||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 47,770 | $ | 129,078 | ||||
Accounts receivable, net | 49,212 | 42,855 | ||||||
Inventories and inventory deposit, net | 35,454 | 21,372 | ||||||
Other current assets | 14,991 | 6,828 | ||||||
Total current assets | 147,427 | 200,133 | ||||||
Property and equipment, net | 15,366 | 9,487 | ||||||
Goodwill and intangible assets, net | 111,642 | 7,248 | ||||||
Other assets, net | 20,057 | 24,060 | ||||||
Total assets | $ | 294,492 | $ | 240,928 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 37,874 | $ | 29,190 | ||||
Deferred income | 11,602 | 4,424 | ||||||
Other accrued liabilities | 26,914 | 19,470 | ||||||
Total current liabilities | 76,390 | 53,084 | ||||||
2013 convertible senior notes, net | 45,000 | 50,000 | ||||||
Other long-term liabilities | 9,065 | 450 | ||||||
Total liabilities | 130,455 | 103,534 | ||||||
Shareholders' equity: | ||||||||
Common stock | 301,225 | 266,945 | ||||||
Accumulated deficit | (138,908 | ) | (134,683 | ) | ||||
Accumulated other comprehensive income | 1,720 | 5,132 | ||||||
Total shareholders’ equity | 164,037 | 137,394 | ||||||
Total liabilities and shareholders’ equity | $ | 294,492 | $ | 240,928 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited) |
||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net loss | $ | (6,651 | ) | $ | (2,082 | ) | $ | (4,225 | ) | $ | (369 | ) | ||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||||||||||
Depreciation and amortization | 5,749 | 2,697 | 17,284 | 12,370 | ||||||||||||
Stock-based compensation expense | 1,679 | 1,278 | 5,717 | 6,158 | ||||||||||||
Other adjustments | 1,393 | 821 | (6,079 | ) | 900 | |||||||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||||||||||
Accounts receivable | 9,660 | 792 | 7,146 | 2,102 | ||||||||||||
Inventories and inventory deposit | 715 | (3,224 | ) | (11,470 | ) | (5,098 | ) | |||||||||
Accounts payable | (15,522 | ) | (5,591 | ) | 2,629 | 82 | ||||||||||
Deferred income | 1,695 | (651 | ) | 4,269 | 998 | |||||||||||
Other operating assets and liabilities | 2,175 | 2,795 | (463 | ) | (1,054 | ) | ||||||||||
Net cash provided by (used in) operating activities | 893 | (3,165 | ) | 14,808 | 16,089 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||
Capital expenditures | (3,882 | ) | (778 | ) | (8,171 | ) | (4,061 | ) | ||||||||
Other investing activities, net | — | (542 | ) | (79,798 | ) | 55,509 | ||||||||||
Net cash provided by (used in) investing activities | (3,882 | ) | (1,320 | ) | (87,969 | ) | 51,448 | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Repurchases of common stock | — | — | (3,920 | ) | — | |||||||||||
Repurchase of convertible notes | (4,875 | ) | — | (4,875 | ) | — | ||||||||||
Proceeds from issuance of common stock | 322 | 456 | 1,646 | 2,586 | ||||||||||||
Other financing activities, net | (515 | ) | (140 | ) | (923 | ) | (41,756 | ) | ||||||||
Net cash provided by (used in) financing activities | (5,068 | ) | 316 | (8,072 | ) | (39,170 | ) | |||||||||
Effect of exchange rate changes on cash | (75 | ) | (10 | ) | (75 | ) | 39 | |||||||||
Net increase (decrease) in cash and cash equivalents | (8,132 | ) | (4,179 | ) | (81,308 | ) | 28,406 | |||||||||
Cash and cash equivalents, beginning of period | 55,902 | 133,257 | 129,078 | 100,672 | ||||||||||||
Cash and cash equivalents, end of period | $ | 47,770 | $ | 129,078 | $ | 47,770 | $ | 129,078 |
REVENUES BY GEOGRAPHY (In thousands, unaudited) |
||||||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||
North America | $ | 33,905 | 42.7 | % | $ | 22,630 | 33.9 | % | $ | 107,042 | 32.4 | % | $ | 97,361 | 34.3 | % | ||||||||
Europe, the Middle East and Africa (“EMEA”) | 16,725 | 21.0 | 20,257 | 30.3 | 79,858 | 24.1 | 80,218 | 28.2 | ||||||||||||||||
Asia Pacific | 28,876 | 36.3 | 23,939 | 35.8 | 143,965 | 43.5 | 106,732 | 37.5 | ||||||||||||||||
Total | $ | 79,506 | 100.0 | % | $ | 66,826 | 100.0 | % | $ | 330,865 | 100.0 | % | $ | 284,311 | 100.0 | % |
REVENUES BY PRODUCT GROUP (In thousands, unaudited) |
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Three Months Ended | Year Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||
Next Generation Communication Networks Products (I) | $ | 51,045 | 64.2 | % | $ | 27,985 | 41.9 | % | $ | 167,134 | 50.5 | % | $ | 118,078 | 41.5 | % | ||||||||
Legacy Communication Networks Products | 13,108 | 16.5 | 20,800 | 31.1 | 89,865 | 27.2 | 91,873 | 32.3 | ||||||||||||||||
Total Communication Networks Products | 64,153 | 80.7 | % | 48,785 | 73.0 | % | 256,999 | 77.7 | % | 209,951 | 73.8 | % | ||||||||||||
Medical Products | 6,432 | 8.1 | % | 8,628 | 12.9 | % | 27,723 | 8.4 | % | 33,366 | 11.8 | % | ||||||||||||
Other Commercial Products | 8,921 | 11.2 | 9,413 | 14.1 | 46,143 | 13.9 | 40,994 | 14.4 | ||||||||||||||||
Total Commercial Products | 15,353 | 19.3 | % | 18,041 | 27.0 | % | 73,866 | 22.3 | % | 74,360 | 26.2 | % | ||||||||||||
Total Revenues | $ | 79,506 | 100.0 | % | $ | 66,826 | 100.0 | % | $ | 330,865 | 100.0 | % | $ | 284,311 | 100.0 | % | ||||||||
(I) For the three and twelve months ended December 31, 2011, Next Generation Communication Networks Products revenues include a reduction in revenue of $666 and $2,043 for purchase accounting adjustments. Refer to the description of non-GAAP financial measures for detail of this adjustment. |
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The following table provides revenue by product group by the Company's new product categories. The Company will report revenue based on these product categories starting in the first quarter of 2012.
REVENUES BY NEW PRODUCT GROUPS (In thousands, unaudited) |
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Three Months Ended | Year Ended | ||||||||||||||||||
December 31, 2011 |
September 30, 2011 |
June 30, 2011 | March 31, 2011 |
December 31, 2011 |
|||||||||||||||
ATCA Platforms | $ | 37,136 | $ | 44,934 | $ | 22,891 | $ | 27,569 | $ | 132,530 | |||||||||
COM Express and Rackmount Server | 12,962 | 16,845 | 14,124 | 12,917 | 56,848 | ||||||||||||||
Software and Solutions (II) | 14,349 | 9,056 | 9,925 | 3,608 | 36,938 | ||||||||||||||
Other Products | 15,059 | 27,041 | 32,916 | 29,533 | 104,549 | ||||||||||||||
Total Revenues | $ | 79,506 | $ | 97,876 | $ | 79,856 | $ | 73,627 | $ | 330,865 | |||||||||
(II) For the three months ended December 31, 2011 and September 30, 2011, Software and Solutions revenues include a reduction in revenue of $666 and $1,377 for purchase accounting adjustments. Refer to the description of non-GAAP financial measures for detail of this adjustment. |
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RECONCILIATION OF GAAP to NON-GAAP FINANCIAL MEASURES AND AS A PERCENT OF REVENUES (In thousands, except per share amounts, unaudited) |
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Three Months Ended | Year Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
GAAP revenues | $ | 79,506 | $ | 66,826 | $ | 330,865 | $ | 284,311 | ||||||||||||||||
(a) Purchase accounting adjustments | 666 | — | 2,043 | — | ||||||||||||||||||||
Non-GAAP revenues | $ | 80,172 | $ | 66,826 | $ | 332,908 | $ | 284,311 | ||||||||||||||||
GROSS MARGIN: | ||||||||||||||||||||||||
GAAP gross margin | $ | 24,793 | 31.2 | % | $ | 21,836 | 32.7 | % | $ | 96,765 | 29.2 | % | $ | 87,214 | 30.7 | % | ||||||||
(a) Purchase accounting adjustments | 666 | — | 2,210 | — | ||||||||||||||||||||
(b) Amortization of acquired intangible assets | 2,738 | 1,164 | 8,348 | 6,182 | ||||||||||||||||||||
(c) Stock-based compensation | 266 | 176 | 838 | 816 | ||||||||||||||||||||
(d) Restructuring and acquisition-related charges, net | 13 | — | 225 | — | ||||||||||||||||||||
Non-GAAP gross margin | $ | 28,476 | 35.5 | % | $ | 23,176 | 34.7 | % | $ | 108,386 | 32.6 | % | $ | 94,212 | 33.1 | % | ||||||||
RESEARCH AND DEVELOPMENT: | ||||||||||||||||||||||||
GAAP research and development | $ | 13,063 | 16.4 | % | $ | 9,504 | 14.2 | % | $ | 44,625 | 13.5 | % | $ | 38,678 | 13.6 | % | ||||||||
(c) Stock-based compensation | (364 | ) | (293 | ) | (1,434 | ) | (1,303 | ) | ||||||||||||||||
Non-GAAP research and development | $ | 12,699 | 15.8 | % | $ | 9,211 | 13.8 | % | $ | 43,191 | 13.0 | % | $ | 37,375 | 13.1 | % | ||||||||
SELLING, GENERAL AND ADMINISTRATIVE: | ||||||||||||||||||||||||
GAAP selling, general and administrative | $ | 15,202 | 19.1 | % | $ | 11,502 | 17.2 | % | $ | 52,722 | 15.9 | % | $ | 45,532 | 16.0 | % | ||||||||
(c) Stock-based compensation | (1,049 | ) | (809 | ) | (3,445 | ) | (4,039 | ) | ||||||||||||||||
Non-GAAP selling, general and administrative | $ | 14,153 | 17.7 | % | $ | 10,693 | 16.0 | % | $ | 49,277 | 14.8 | % | $ | 41,493 | 14.6 | % | ||||||||
INCOME FROM OPERATIONS: | ||||||||||||||||||||||||
GAAP income (loss) from operations | $ | (6,477 | ) | (8.1 | )% | $ | (1,140 | ) | (1.7 | )% | $ | (11,403 | ) | (3.4 | )% | $ | 699 | 0.2 | % | |||||
(a) Purchase accounting adjustments | 666 | — | 2,210 | — | ||||||||||||||||||||
(b) Amortization of acquired intangible assets | 4,042 | 1,356 | 11,270 | 6,912 | ||||||||||||||||||||
(c) Stock-based compensation | 1,679 | 1,278 | 5,717 | 6,158 | ||||||||||||||||||||
(d) Restructuring and acquisition-related charges, net | 1,714 | 1,778 | 10,205 | 1,575 | ||||||||||||||||||||
(e) Gain on the liquidation of a foreign subsidiary | — | — | (2,081 | ) | — | |||||||||||||||||||
Non-GAAP income from operations | $ | 1,624 | 2.0 | % | $ | 3,272 | 4.9 | % | $ | 15,918 | 4.8 | % | $ | 15,344 | 5.4 | % | ||||||||
NET INCOME | ||||||||||||||||||||||||
GAAP net loss | $ | (6,651 | ) | (8.4 | )% | $ | (2,082 | ) | (3.1 | )% | $ | (4,225 | ) | (1.3 | )% | $ | (369 | ) | (0.1 | )% | ||||
(a) Purchase accounting adjustments | 666 | — | 2,210 | — | ||||||||||||||||||||
(b) Amortization of acquired intangible assets | 4,042 | 1,356 | 11,270 | 6,912 | ||||||||||||||||||||
(c) Stock-based compensation | 1,679 | 1,278 | 5,717 | 6,158 | ||||||||||||||||||||
(d) Restructuring and acquisition-related charges, net | 1,714 | 1,778 | 10,205 | 1,575 | ||||||||||||||||||||
(e) Gain on the liquidation of a foreign subsidiary | — | — | (2,081 | ) | — | |||||||||||||||||||
(f) Non-recurring tax adjustments | (97 | ) | — | (7,654 | ) | (1,029 | ) | |||||||||||||||||
(g) Income tax effect of reconciling items | 9 | (306 | ) | (614 | ) | (405 | ) | |||||||||||||||||
Non-GAAP net income | $ | 1,362 | 1.7 | % | $ | 2,024 | 3.0 | % | $ | 14,828 | 4.5 | % | $ | 12,842 | 4.5 | % | ||||||||
GAAP weighted average diluted shares | 26,502 | 24,310 | 25,413 | 24,144 | ||||||||||||||||||||
Escrow shares | 1,344 | — | 647 | — | ||||||||||||||||||||
Dilutive equity awards included in | ||||||||||||||||||||||||
Non-GAAP earnings per share | 861 | 509 | 648 | 444 | ||||||||||||||||||||
2013 convertible senior notes dilutive shares (I) (II) | — | — | 3,829 | 3,837 | ||||||||||||||||||||
Non-GAAP weighted average diluted shares (I) (II) | 28,707 | 24,819 | 30,537 | 28,425 | ||||||||||||||||||||
GAAP net loss per share (diluted) | $ | (0.25 | ) | $ | (0.09 | ) | $ | (0.17 | ) | $ | (0.02 | ) | ||||||||||||
Non-GAAP adjustments detailed above | 0.30 | 0.17 | 0.72 | 0.52 | ||||||||||||||||||||
NON-GAAP net income per share (diluted) (I) (II) | $ | 0.05 | $ | 0.08 | $ | 0.55 | $ | 0.50 |
(I) For the three months ended December 31, 2011 and 2010, the diluted earnings per share calculation excludes the effects of the Company's 2013 convertible senior notes, as they are anti-dilutive.
(II) For the years ended December 31, 2011 and 2010, the diluted earnings per share calculation excludes interest costs, net of tax benefit, totaling $1.9 million and $1.5 million related to dilutive equity shares underlying our 2013 convertible senior notes.
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE NET INCOME (LOSS) PER SHARE (In millions, except per share amounts, unaudited) |
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Three Months Ended | Year Ended | |||||||||||||||
March 31, 2012 | December 31, 2012 | |||||||||||||||
Low End | High End | Low End | High End | |||||||||||||
GAAP net income (loss) (assumes tax rate of 10%) | $ | (6.9 | ) | $ | (5.5 | ) | $ | (1.4 | ) | $ | 0.3 | |||||
(a) Purchase accounting adjustments | 0.2 | 0.2 | 0.4 | 0.4 | ||||||||||||
(b) Amortization of acquired intangible assets | 3.7 | 3.7 | 14.8 | 14.8 | ||||||||||||
(c) Stock-based compensation | 2.3 | 2.3 | 8.5 | 8.5 | ||||||||||||
(d) Restructuring and acquisition-related charges, net | 1.6 | 1.6 | 3.8 | 3.8 | ||||||||||||
(g) Income tax effect of reconciling items | (0.8 | ) | (0.7 | ) | (1.5 | ) | (1.4 | ) | ||||||||
Total adjustments | 7.0 | 7.1 | 26.0 | 26.1 | ||||||||||||
Non-GAAP net income (assumes tax rate of 5%) | $ | 0.1 | $ | 1.6 | $ | 24.6 | $ | 26.4 | ||||||||
GAAP weighted average shares | 26,650 | 26,650 | 26,800 | 28,800 | ||||||||||||
Non-GAAP adjustments | 2,350 | 2,350 | 6,100 | 4,100 | ||||||||||||
Non-GAAP weighted average shares (diluted) (I) | 29,000 | 29,000 | 32,900 | 32,900 | ||||||||||||
GAAP net income (loss) per share | $ | (0.26 | ) | $ | (0.21 | ) | $ | (0.05 | ) | $ | 0.01 | |||||
Non-GAAP adjustments detailed above | 0.26 | 0.27 | 0.85 | 0.84 | ||||||||||||
Non-GAAP net income per share (diluted) (I) | $ | — | $ | 0.06 | $ | 0.80 | $ | 0.85 | ||||||||
(I) For the three months ended March 31, 2012, guidance for the diluted earnings per share calculation excludes the effects of our 2013 convertible senior notes, as they are anti-dilutive. For the year ended December 31, 2012, guidance for the diluted earnings per share calculation includes the effects of the 3.5 million shares underlying our 2013 convertible senior notes and excludes the related interest costs totaling $1.7 million.
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE REVENUES (unaudited) |
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Three Months Ended | Year Ended | |||||||||||||||||||
March 31, 2012 | December 31, 2012 | |||||||||||||||||||
Low End | High End | Low End | High End | |||||||||||||||||
GAAP | $ | 74.8 | $ | 80.8 | $ | 344.6 | $ | 354.6 | ||||||||||||
(a) Purchase accounting adjustments | 0.2 | 0.2 | 0.4 | 0.4 | ||||||||||||||||
Non-GAAP | $ | 75.0 | $ | 81.0 | $ | 345.0 | $ | 355.0 |
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE GROSS MARGIN (unaudited) |
||||||||||||
Three Months Ended | Year Ended | |||||||||||
March 31, 2012 | December 31, 2012 | |||||||||||
Low End | High End | Low End | High End | |||||||||
GAAP | 29.1 | % | 30.5 | % | 32.8 | % | 33.9 | % | ||||
(a) Purchase accounting adjustments | 0.3 | 0.2 | 0.1 | 0.1 | ||||||||
(b) Amortization of acquired intangible assets | 3.3 | 3.0 | 2.8 | 2.7 | ||||||||
(c) Stock-based compensation | 0.3 | 0.3 | 0.3 | 0.3 | ||||||||
Non-GAAP | 33.0 | % | 34.0 | % | 36.0 | % | 37.0 | % |
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE RESEARCH AND DEVELOPMENT EXPENSE AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSE (In millions, unaudited) |
|||||||||
Estimates at the midpoint of the guidance range for the |
Estimates at the midpoint of the guidance range for the | ||||||||
Three Months Ended | Year Ended | ||||||||
March 31, 2012 | December 31, 2012 | ||||||||
GAAP | $ | 28.1 | $ | 112.0 | |||||
(b) Amortization of acquired intangible assets | (1.3 | ) | (5.2 | ) | |||||
(c) Stock-based compensation | (2.0 | ) | (7.5 | ) | |||||
Non-GAAP | $ | 24.8 | $ | 99.3 | |||||
The Company excludes the following expenses, reversals, gains and losses from its non-GAAP financial measures, when applicable:
(a) Purchase accounting adjustments: Purchase accounting adjustments consistent of the impact to revenues and cost of sales associated with adjusting deferred revenue and inventories of acquired companies to fair value. For deferred revenue, as is the case with our existing business, at the time of acquisition, the acquired business recorded deferred revenue related to past transactions for which revenue would have been recognized by the acquired entity in future periods as revenue recognition criteria were satisfied. However, purchase accounting rules require us to write down a portion of this deferred revenue to its then current fair value, which is equivalent to the cost to complete the outstanding obligations required to earn the deferred revenue plus a reasonable margin. Consequently, in post-acquisition periods, we do not recognize the full amount of this deferred revenue. When measuring the performance of our business, however, we add back non-GAAP revenue associated with deferrals for which no future obligations existed as well as obligations we assumed to provide maintenance or support to customers of the acquired business that were excluded as a result of these purchase accounting adjustments. We believe that the non-GAAP revenue disclosures enhance investors' ability to conduct period-over-period analyses of our results that reflect the full impact of the acquired business's results together with the results from our pre-existing products and services.
In addition, the non-GAAP financial results exclude the impact to cost of sales from the markup of inventories required by GAAP as part of the fair value adjustments required under purchase accounting for business combinations. This results from marking the acquired company's inventory to fair value at the time of acquisition. This charge is not factored into management's evaluation of potential acquisitions or our performance after completion of acquisitions, because it is not related to our core operating performance, and the frequency and amount of this type of charge can vary significantly based on the size and timing of our acquisitions. Excluding this data provides investors with a basis to compare the company against the performance of other companies without this variability.
(b) Amortization of acquired intangible assets: Amortization of acquisition-related intangible assets primarily relate to core and existing technologies, patents, trade name and customer relationships that were acquired with the acquisition of Convedia, MCPD and Pactolus. The Company excludes the amortization of acquisition-related intangible assets because it does not reflect the Company's ongoing business and it does not have a direct correlation to the operation of the Company's business. In addition, in accordance with GAAP, the Company generally recognizes expenses for internally-developed intangible assets as they are incurred, notwithstanding the potential future benefit such assets may provide. Unlike internally-developed intangible assets, however, and also in accordance with GAAP, the Company generally capitalizes the cost of acquired intangible assets and recognizes that cost as an expense over the useful lives of the assets acquired. As a result of their GAAP treatment, there is an inherent lack of comparability between the financial performance of internally-developed intangible assets and acquired intangible assets. Accordingly, the Company believes it is useful to provide, as a supplement to its GAAP operating results, non-GAAP financial measures that exclude the amortization of acquired intangibles in order to enhance the period-over-period comparison of its operating results, as there is significant variability and unpredictability across companies with respect to this expense.
(c) Stock-based compensation: Stock-based compensation consists of expenses recorded under GAAP, in connection with stock awards such as stock options, restricted stock awards and restricted stock units granted under the Company's equity incentive plans and shares issued pursuant to the Company's employee stock purchase plan. The Company excludes stock-based compensation from non-GAAP financial measures because it is a non-cash measurement that does not reflect the Company's ongoing business and because the Company believes that investors want to understand the impact on the Company of the adoption of the applicable GAAP surrounding share based payments; the Company believes that the provision of non-GAAP information that excludes stock-based compensation improves the ability of investors to compare its period-over-period operating results, as there is significant variability and unpredictability across companies with respect to this expense.
(d) Restructuring and acquisition-related charges, net: Restructuring and acquisition-related charges, net: Restructuring primarily relates to activities engaged in by the Company's management to simplify and focus its infrastructure. Restructuring and other charges are excluded from non-GAAP financial measures because they are not considered core operating activities. Although the Company has engaged in various restructuring activities over the past several years, each has been a discrete event based on a unique set of business objectives. The Company does not engage in restructuring activities in the ordinary course of business. As such, the Company believes it is appropriate to exclude restructuring charges from its non-GAAP financial measures because it enhances the ability of investors to compare the Company's period-over-period operating results.
In addition to restructuring activities, we exclude certain other acquisition-related items including the following, when applicable: (i) integration related charges; and (ii) acquisition-related charges. Acquisitions result in non-recurring operating expenses, which would not otherwise have been incurred by us in the normal course of our business operations. Integration charges include, among other things, expenses associated with operational consolidation, training, rebranding and consulting. Acquisition-related charges include transaction fees and legal and professional service expenses incurred in connection with our acquisitions. We believe that providing non-GAAP information for acquisition-related expense items in addition to the corresponding GAAP information allows the users of our financial statements to better review and understand the historic and current results of our continuing operations, and also facilitates comparisons to less acquisitive peer companies.
(e) Gain on the liquidation of a foreign subsidiary: During the third quarter of 2011, as part of an update of our tax planning strategy, we completed the liquidation of Radisys Technology Ireland Limited (“RTIL”). As a result of this liquidation we recorded a gain to reflect the realization of accumulated foreign currency translation adjustments related to RTIL. This gain represents the net unrealized foreign currency translation gains accumulated from changes in exchange rates and the related effects from the translation of assets and liabilities of RTIL. The liquidation of foreign subsidiaries occurs on an infrequent basis and management does not view the impact of this non-cash charge as indicative of the ongoing performance of the Company. As such, the Company believes it is appropriate to exclude this gain from its non-GAAP financial measures because it enhances the ability of investors to compare the Company's period-over-period operating results.
(f) Non-recurring tax adjustments: During the third quarter of 2011 the Company recorded an income tax benefit of $7.6 million related to the partial reversal of the valuation allowance recorded on our deferred tax assets. The reversal is the direct result of the addition of deferred tax liabilities associated with the acquisition of Continuous Computing during the third quarter of 2011. During the third quarter of 2010 the Company reversed approximately $1.4 million of income tax liabilities that were previously accrued for uncertain tax positions. In addition, during the third quarter of 2010 the Company accrued an additional $400K of income tax contingencies related to an uncertain tax position. The Company believes it is appropriate to exclude these non-recurring tax adjustments from its non-GAAP financial measures because it enhances the ability of investors to compare the Company's period-over-period operating results and each adjustment had a non-cash benefit during the respective periods.
(g) Income taxes: Income tax provision/ (benefit) associated with non-GAAP adjustments, which is calculated as the net effect of all non-GAAP financial statement adjustments on the Company's overall income tax provision/ (benefit).
CONTACT:
Radisys Corporation
Allen Muhich, 503-615-1616
Vice
President of Finance
allen.muhich@radisys.com