Radisys Corporation (NASDAQ: RSYS), a global leader of open
telecom solutions, today announced financial results for the second
quarter ended June 30, 2017.
Second Quarter Summary
- Consolidated revenue of $35.1 million,
consistent with the Company’s preliminary revenue estimate of $35
million;
- GAAP loss per share was $0.19, with a
non-GAAP loss of $0.06 per share improving from a loss of $0.14 per
share sequentially;
- Cash flow from operations was $10.3
million;
- Successfully launched the FlowEngine
TDE-2000 and secured the first commercial program award.
Additionally, TDE-2000 is already in five active proof-of-concepts
and trials; and
- Converted initial CORD lab system order
from a new Tier 1 U.S. service provider while also being named the
systems integrator by a Southern European service provider for CORD
trials beginning in 2018.
“As we announced on July 6, second quarter financial results
were below our initial expectations due exclusively to business
challenges at two of our largest customers,” said Brian Bronson,
Radisys President and Chief Executive Officer. “Although revenue
declined sequentially, our non-GAAP loss improved significantly
from the first quarter as a result of increased orders across our
Software-Systems product lines.
“Despite these dynamics, Radisys continues to be viewed as a
disruptor by leading service providers around the globe. The
growing number of proof-of-concepts and trials as well as the
initial lab system order we received from a new Tier 1 U.S. service
provider serves as continued validation of our relevant market
position. Current and prospective customers recognize the value of
our products, solutions and thought leadership as they look towards
fundamentally transforming their network infrastructure. Given
these longer-term favorable market conditions, our primary
objective entering 2017 was to secure new customers in order to
realize greater revenue diversification in 2018 and beyond.
Although it continues to be difficult to predict the timing of new
technology and commercial product adoption, we have made meaningful
progress over the past few quarters as demonstrated by our over
thirty active engagements, including over fifteen ongoing
proof-of-concepts and trials which span all of our strategic
product lines. As a result, I remain confident we will secure new
commercial wins in the second half of 2017, which will drive
material strategic revenue growth over time.
“Finally, as we stated at the outset of 2017, achievement of our
full-year financial guidance required that two of our largest
customers would continue to drive significant revenue and
associated profits. While we continue to make progress in expanding
our footprint within our top two strategic customers, and while we
have not lost previously awarded orders or programs, near-term
visibility has become limited for various customer-specific
reasons. Based on recent discussions with our largest customer, we
are revising our full-year revenue expectations to exclude any new
product orders from this customer as they now expect orders to
resume in 2018. We remain confident in our ability to generate
long-term revenue growth with both of these customers; however, we
also believe it’s appropriate to acknowledge the reduced visibility
by taking a more conservative approach near-term. We will provide
another update on our third quarter earnings call and in the
interim continue to focus on making the strategic progress required
to significantly diversify our revenue streams over time in order
to deliver longer-term growth.”
Software-Systems Results
For the second quarter of 2017, Software-Systems revenue was
$11.5 million, compared to $10.1 million in the prior quarter and
$14.6 million in the second quarter of 2016. The sequential
improvement was the result of growth in MediaEngine and FlowEngine
product sales tied to both existing customers and initial new
customer traction.
Gross margin was 54.3%, compared to 53.8% in the prior quarter
and 62.8% in the second quarter of 2016. The sequential improvement
was the result of revenue growth tied to product sales.
Operating loss was $1.9 million, compared to an operating loss
of $3.3 million in the prior quarter and break-even results in the
second quarter of 2016.
Hardware Solutions Results
For the second quarter of 2017, Hardware Solutions revenue was
$23.6 million, compared to $27.5 million in the prior quarter and
$46.7 million in the second quarter of 2016. The sequential decline
reflects a delay in DCEngine orders from our largest customer and
partially offset by a sequential improvement from last-time
customer builds across our legacy embedded product lines.
Gross margin was 24.3%, compared to 17.4% in the prior quarter
and 17.8% in the second quarter of 2016. The sequential improvement
was the result of favorable product mix given the decline in
DCEngine orders relative to the first quarter.
Operating income was $0.2 million, compared to an operating loss
of $1.3 million in the prior quarter and operating income of $3.7
million in the second quarter of 2016.
Consolidated Results
For the second quarter of 2017, consolidated revenue was $35.1
million, compared to $37.6 million in the prior quarter and $61.3
million in the second quarter of 2016.
On a GAAP basis, gross margin in the second quarter of 2017 was
28.5%, compared to 21.9% in the prior quarter and 25.2% in the
second quarter of 2016. Second quarter 2017 GAAP research and
development and selling, general, and administrative expenses were
$14.2 million, compared to $15.9 million in the prior quarter and
$14.9 million in the second quarter of 2016. The decrease in
operating expenses sequentially was the result of prudent expense
management across the business in the second quarter.
On a non-GAAP basis, second quarter 2017 gross margin was 34.1%,
compared to 27.2% in the prior quarter and 28.6% in the second
quarter of 2016. Second quarter 2017 research and development and
selling, general and administrative expenses on a non-GAAP basis
were $13.7 million, compared to $14.8 million in the prior quarter
and $13.8 million in the second quarter of 2016.
For the second quarter of 2017, the Company recorded a GAAP net
loss of $7.6 million, or $0.19 per share, compared to a GAAP net
loss of $10.0 million, or $0.26 per share, in the prior quarter and
a GAAP net loss of $0.6 million, or $0.02 per share, in the second
quarter of 2016. On a non-GAAP basis, the Company recorded a net
loss of $2.2 million, or $0.06 per share, in the second quarter of
2017, compared to a net loss of $5.5 million, or $0.14 per share,
in the prior quarter and net income of $3.7 million, or $0.10 per
diluted share, in the second quarter of 2016.
Third Quarter 2017 Financial Guidance
- Revenue is expected between $26 to $30
million, which represents approximately flat Software-Systems
revenue sequentially and a reduction in Hardware-Solutions revenue
tied to an expected decline in legacy embedded products revenue as
well as no expected new product orders from the Company’s top
DCEngine customer.
- GAAP gross margin is expected to
approximate 3% and GAAP R&D and SG&A expenses are expected
to be approximately $13.8 million. Non-GAAP gross margin is
expected between 6% and 15% of sales, which includes the impact of
a potential $6.5 million non-cash inventory write-down at the
midpoint given remaining exposures tied to final product
end-of-life transitions within the Company’s legacy embedded
products portfolio which are expected to be finalized during the
third quarter. Excluding the impact of this inventory write-down,
non-GAAP gross margin is expected to be between 33% and 35% of
sales, largely consistent with the second quarter.
- GAAP loss is expected to be in a range
of $0.40 to $0.33 per share. Non-GAAP loss is expected to range
from $0.31 to $0.24 per share. Excluding the impact of the non-cash
inventory write-down, non-GAAP loss is expected between $0.13 and
$0.09 cents per share.
Revised 2017 Annual Financial Guidance
- Revenue is now expected between $130
million to $140 million. The revised revenue range is based on the
limited visibility provided by the Company’s largest customer, and
does not include any new DCEngine orders from this customer for the
remainder of the year. Additionally, any material commercial
revenue from the existing proof-of-concepts and trials ongoing
across the Company’s strategic product lines would represent
additional revenue not reflected in the revised guidance
range.
- GAAP gross margin is expected to
approximate 24% and GAAP R&D and SG&A expenses are expected
to be approximately $56.5 million. Non-GAAP gross margin is
expected to approximate 28% to 30% of sales, and excluding the
impact of the non-cash inventory write-down in the third quarter,
non-GAAP gross margin is expected to approximate 34% of sales.
Total non-GAAP R&D and SG&A expenses are expected to
approximate $54.5 million.
- GAAP loss is expected to be in a range
of $0.87 to $0.77 per share. Non-GAAP loss is expected to range
from $0.50 to $0.39 per share. Excluding the impact of the non-cash
inventory write-down in the third quarter, non-GAAP loss is
expected between $0.32 and $0.24 cents per share.
Conference Call and Webcast Information
The Company will host a conference call to discuss second
quarter 2017 results on August 1, 2017, at 5:00 p.m. ET. 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 # 19225505. 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. on August 15, 2017. To
access the replay, dial 855-859-2056 or 404-537-3406 and reference
conference ID# 19225505. 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/.
About Radisys
Radisys (NASDAQ: RSYS) helps communications and content
providers, and their strategic partners, create new revenue streams
and drive cost out of their services delivery infrastructure.
Radisys’ hyperscale software defined infrastructure, service aware
traffic distribution platforms, real-time media processing engines
and wireless access technologies enable its customers to maximize,
virtualize and monetize their networks.
Forward-Looking Statements
This press release contains forward-looking statements,
including statements about the Company's business strategy, changes
in reporting segments financial outlook and expectations for the
third quarter and fiscal 2017, and statements related to revenue
and gross margins from our respective segments and product lines,
investments in future growth, expense savings or reductions,
increased profitability, product line focus, operational and
administrative efficiencies, revenue growth, margin improvement,
financial performance and other attributes of the Company. These
forward-looking statements are based on the Company's expectations
and assumptions, as of the date such statements are made, regarding
the Company's future operating performance and financial condition,
customer requirements, outcome of product trials, the economy and
other future events or circumstances. 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) increased Tier 1 commercial
deployments across multiple product lines, (b) continued
implementation of the Company’s next-generation products, (c)
customer implementation of traffic management solutions, (d) the
outcome of product trials, (e) the market success of customers'
products and solutions, (f) the development and transition of new
products and solutions, including our FlowEngine appliance,
CellEngine 5G RAN technology and our strategic MediaEngine channel
agreement, (g) the enhancement of existing products and solutions
to meet customer needs and respond to emerging technological
trends, (h) the Company’s ability to raise additional growth
capital, (i) the Company's dependence on certain customers and high
degree of customer concentration, (j) the Company's use of one
contract manufacturer for a significant portion of the production
of its products, including the success of transitioning contract
manufacturing partners, (k) matters affecting the software and
embedded product industry, including changes in industry standards,
changes in customer requirements and new product introductions, (l)
actions by regulatory authorities or other third parties, (m) cash
generation, (n) changes in tariff and trade policies and other
risks associated with foreign operations, (o) fluctuations in
currency exchange rates, (p) the ability of the Company to
successfully complete any restructuring, acquisition or divestiture
activities, (q) risks relating to fluctuations in the Company's
operating results, the uncertainty of revenues and profitability
and the potential need to raise additional funding and (r) 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, 2016, 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. The Company believes its expectations and
assumptions are reasonable, but there can be no assurance that the
expectations reflected herein will be achieved. All information in
this press release is as of August 1, 2017. 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) amortization of acquired intangible assets, (b)
stock-based compensation expense, (c) restructuring and other
charges (reversals), net, (d) non-cash income tax expense, (e) gain
on the liquidation of foreign subsidiaries and (f) inventory
write-down. 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 a
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.
Radisys® is a registered trademark of
Radisys
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share
amounts, unaudited) Three Months Ended Six
Months Ended June 30, June 30, 2017
2016 2017 2016 Revenues
Product $ 26,340 $ 51,629 $ 55,039 $ 98,947 Service 8,753
9,659 17,664 17,487
Total revenues 35,093 61,288
72,703 116,434 Cost of sales: Product
17,913 38,208 40,089 73,940 Service 5,245 5,708 10,530 10,411
Amortization of purchased technology 1,927
1,927 3,854 3,854 Total cost of
sales 25,085 45,843 54,473
88,205 Gross margin 10,008 15,445 18,230
28,229 Operating expenses: Research and development 5,994 6,298
12,474 11,951 Selling, general and administrative 8,214 8,554
17,596 16,193 Intangible assets amortization 1,260 1,260 2,520
2,520 Restructuring and other charges, net 1,235
265 1,470 947 Loss from
operations (6,695 ) (932 ) (15,830 ) (3,382 ) Interest expense (224
) (159 ) (496 ) (276 ) Other income (expense), net (130 )
1,069 (427 ) 1,208 Loss before
income tax expense (7,049 ) (22 ) (16,753 ) (2,450 ) Income tax
expense 505 569 809
1,106 Net loss $ (7,554 ) $ (591 ) $ (17,562 ) $
(3,556 ) Net loss per share: Basic $ (0.19 ) $ (0.02 ) $
(0.45 ) $ (0.10 ) Diluted $ (0.19 ) $ (0.02 ) $ (0.45 ) $ (0.10 )
Weighted average shares outstanding Basic 38,966
37,143 38,840 37,075
Diluted 38,966 37,143 38,840
37,075
CONDENSED CONSOLIDATED BALANCE SHEETS (In
thousands, unaudited) June 30, 2017
December 31, 2016 ASSETS Current assets: Cash
and cash equivalents $ 46,248 $ 33,087 Accounts receivable, net
43,586 38,378 Inventories, net 14,748 20,021 Other current assets
7,311 7,151 Total current assets
111,893 98,637 Property and equipment, net 7,253 6,713 Intangible
assets, net 11,202 17,575 Other assets, net 2,936
5,260 Total assets $ 133,284 $ 128,185
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable $ 23,862 $ 20,805 Deferred revenue
6,917 5,715 Other accrued liabilities 11,652 14,143 Line of credit
45,000 25,000 Total current liabilities
87,431 65,663 Other long-term liabilities 5,532
5,966 Total liabilities 92,963
71,629 Shareholders' equity: Common stock 341,579 339,715
Accumulated deficit (301,140 ) (281,600 ) Accumulated other
comprehensive income (118 ) (1,559 ) Total
shareholders’ equity 40,321 56,556
Total liabilities and shareholders’ equity $ 133,284 $
128,185
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (In thousands, unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2017
2016 2017 2016 Cash flows
from operating activities: Net loss $ (7,554 ) $ (591 ) $
(17,562 ) $ (3,556 ) Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: Depreciation and
amortization 4,487 4,248 8,845 8,593 Stock-based compensation
expense 538 1,192 1,692 1,880 Other 318 (309 ) 1,030 621 Changes in
operating assets and liabilities: Accounts receivable 6,340 (4,205
) (5,207 ) 17,929 Inventories and deferred cost of sales (3,878 )
4,525 4,803 5,103 Other receivables (824 ) (1,247 ) (83 ) 7,007
Accounts payable 10,193 (6,549 ) 3,155 (18,704 ) Deferred revenue
332 (666 ) 1,910 (17,359 ) Other operating assets and liabilities
377 2,543 (2,765 ) (891 )
Net cash provided by (used in) operating activities 10,329
(1,059 ) (4,182 ) 623
Cash
flows from investing activities: Capital expenditures
(1,355 ) (708 ) (3,158 ) (1,130 ) Net cash
used in investing activities (1,355 ) (708 )
(3,158 ) (1,130 )
Cash flows from financing
activities: Borrowings on line of credit, net 5,000 10,000
20,000 10,000 Other financing activities, net 170
374 86 479 Net cash
provided by financing activities 5,170 10,374
20,086 10,479 Effect of exchange
rate changes on cash and cash equivalents 79
(64 ) 415 190 Net increase in cash and
cash equivalents 14,223 8,543 13,161 10,162 Cash and cash
equivalents, beginning of period 32,025 22,383
33,087 20,764 Cash and cash
equivalents, end of period $ 46,248 $ 30,926 $ 46,248
$ 30,926
REVENUES, GROSS MARGIN AND INCOME (LOSS) FROM OPERATIONS BY
OPERATING SEGMENT (In thousands, unaudited)
Three Months Ended Six Months Ended June 30,
June 30, 2017 2016 2017
2016 Revenue Software-Systems $ 11,488 $
14,601 $ 21,637 $ 28,660 Hardware Solutions 23,605
46,687 51,066 87,774
Total revenues $ 35,093 $ 61,288 $ 72,703 $
116,434
Three Months Ended Six Months
Ended June 30, June 30, 2017 2016
2017 2016 Gross margin Software-Systems $ 6,243 $
9,172 $ 11,708 $ 17,960 Hardware Solutions 5,732 8,331 10,513
14,300 Corporate and other (1,967 ) (2,058 )
(3,991 ) (4,031 ) Total gross margin $ 10,008 $
15,445 $ 18,230 $ 28,229
Three
Months Ended Six Months Ended June 30, June
30, 2017 2016 2017 2016 Income
(loss) from operations Software-Systems $ (1,943 ) $ 31 $ (5,216 )
$ 811 Hardware Solutions 208 3,681 (1,078 ) 5,008 Corporate and
other (4,960 ) (4,644 ) (9,536 ) (9,201
) Total loss from operations $ (6,695 ) $ (932 ) $ (15,830 ) $
(3,382 )
REVENUES BY
GEOGRAPHY (In thousands, unaudited) Three
Months Ended Six Months Ended June 30, June
30, 2017 2016 2017
2016 North America $ 15,191 43.3 % $
44,314 72.3 % $ 38,362 52.7 % $ 82,157
70.6 % Asia Pacific 6,697 19.1 6,461 10.5 12,116 16.7
14,079 12.1 Europe, the Middle East and Africa 13,205
37.6 10,513 17.2
22,225 30.6 20,198 17.3
Total $ 35,093 100.0 % $ 61,288
100.0 % $ 72,703 100.0 % $ 116,434
100.0 %
RECONCILIATION
OF GAAP TO NON-GAAP FINANCIAL MEASURES AND AS A PERCENT OF
REVENUES (In thousands, except per share amounts,
unaudited) Three Months Ended Six Months
Ended June 30, June 30, 2017
2016 2017 2016
GROSS MARGIN:
GAAP gross margin $ 10,008 28.5
% $ 15,445 25.2 % $ 18,230
25.1 % $ 28,229 24.2 % (a) Amortization
of acquired intangible assets 1,927 1,927 3,854 3,854 (b)
Stock-based compensation 40
131 137
177 Non-GAAP gross
margin $ 11,975 34.1 % $ 17,503
28.6 % $ 22,221 30.6 % $ 32,260
27.7 %
RESEARCH AND DEVELOPMENT: GAAP
research and development $ 5,994 17.1 % $
6,298 10.3 % $ 12,474
17.2 % $ 11,951 10.3 % (b) Stock-based
compensation 113 285
343
438 Non-GAAP research and
development $ 5,881 16.8 % $ 6,013
9.8 % $ 12,131 16.7 % $ 11,513
9.9 %
SELLING, GENERAL AND
ADMINISTRATIVE: GAAP selling, general and administrative $
8,214 23.4 % $ 8,554 14.0
% $ 17,596 24.2 % $ 16,193
13.9 % (b) Stock-based compensation 385
776 1,212
1,265
Non-GAAP selling, general and administrative $ 7,829
22.3 % $ 7,778 12.7 % $ 16,384
22.5 % $ 14,928 12.8 %
INCOME (LOSS) FROM OPERATIONS: GAAP loss from
operations $ (6,695 ) (19.1 )% $ (932 )
(1.5 )% $ (15,830 ) (21.8 )% $ (3,382 )
(2.9 )% (a) Amortization of acquired intangible assets 3,187 3,187
6,374 6,374 (b) Stock-based compensation 538 1,192 1,692 1,880 (c)
Restructuring and other charges, net 1,235
265 1,470
947
Non-GAAP income (loss) from operations $ (1,735 )
(4.9 )% $ 3,712 6.1 % $ (6,294 )
(8.7 )% $ 5,819 5.0 %
NET INCOME
(LOSS): GAAP net loss $ (7,554 ) (21.5 )% $ (591
) (1.0 )% $ (17,562 ) (24.2 )% $ (3,556
) (3.1 )% (a) Amortization of acquired intangible
assets 3,187 3,187 6,374 6,374 (b) Stock-based compensation 538
1,192 1,692 1,880 (c) Restructuring and other charges, net 1,235
265 1,470 947 (d) Income taxes 347 109 233 278 (e) Gain on the
liquidation of foreign subsidiaries $ —
$ (421 ) $ — $
(421 ) Non-GAAP net income (loss) $ (2,247 )
(6.4 )% $ 3,741 6.1 % $ (7,793 )
(10.7 )% $ 5,502 4.7 %
GAAP weighted average diluted shares 38,966 37,143 38,840 37,075
Dilutive equity awards included in non-GAAP earnings per share
— 2,012
— 1,090
Non-GAAP weighted average diluted
shares 38,966 39,155
38,840
38,165 GAAP net loss per
share (diluted) $ (0.19 ) $ (0.02 ) $ (0.45 ) $ (0.10 ) Non-GAAP
adjustments detailed above 0.13
0.12 0.25
0.24 Non-GAAP net
income (loss) per share (diluted) $ (0.06 ) $
0.10 $ (0.20 ) $
0.14
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE NET
LOSS PER SHARE (In millions, except per share amounts,
unaudited) Three Months Ended For the year
Ended September 30, 2017 December 31, 2017 Low
End High End Low End
High End GAAP net loss (15.5 ) (12.9 ) (34.0 ) (29.9 ) (a)
Amortization of acquired intangible assets 2.2 2.2 10.7 10.7 (b)
Stock-based compensation 0.5 0.5 2.2 2.2 (c) Restructuring and
acquisition-related charges, net 0.5 0.5 1.0 1.0 (f) Income taxes
0.2 0.2 0.6 0.8
Total adjustments
3.4 3.4
14.5 14.7 Non-GAAP
net loss
(12.1 ) (9.5 )
(19.5 ) (15.2 ) (f)
Inventory write-down 7.0 6.0 7.0
6.0 Non-GAAP net loss excluding inventory
write-down
$ (5.1 ) $ (3.5
) $ (12.5 ) $ (9.2
) GAAP weighted average shares 39,000 39,000 39,000
39,000 Non-GAAP adjustments — —
— — Non-GAAP weighted average shares
39,000 39,000
39,000 39,000 GAAP net
loss per share (0.40 ) (0.33 ) (0.87 ) (0.77 ) Non-GAAP adjustments
detailed above 0.09 0.09 0.37
0.38 Non-GAAP net loss per share
(0.31 ) (0.24 )
(0.50 ) (0.39 ) (f) Inventory
write-down 0.18 0.15 0.18
0.15 Non-GAAP net loss per share excluding inventory
write-down
$ (0.13 ) $ (0.09
) $ (0.32 ) $ (0.24
) RECONCILIATION OF GAAP TO
NON-GAAP GUIDANCE GROSS MARGIN (unaudited)
Estimates at the midpoint of the guidance range Three
Months Ended For the Year Ended
September 30, 2017 December 31, 2017 GAAP
3.4
% 23.5 % (a) Amortization of acquired
intangible assets 6.9 5.7 (b) Stock-based compensation 0.1
0.1 Non-GAAP
10.4 29.3 (f)
Inventory write-down 23.2 4.9 Non-GAAP excluding
inventory write-down
33.6 % 34.2 %
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 Three Months Ended For the Year
Ended September 30, 2017 December 31, 2017 GAAP
$ 13.8 $ 56.5 (b) Stock-based
compensation 0.5 2.0 Non-GAAP
$ 13.3
$ 54.5
Non-GAAP financial measures includes the performance of
Software-Systems and Embedded Products and Hardware Services.
The Company excludes the following corporate and other expenses,
reversals, gains and losses from its non-GAAP financial measures,
when applicable:
(a) Amortization of acquired intangible assets:
Amortization of acquisition-related intangible assets primarily
relate to core and existing technologies, trade name and customer
relationships that were acquired with the acquisitions of
Continuous Computing 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.
(b) 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.
(c) Restructuring and other charges, net: Restructuring
and other charges, net relates to costs associated with
non-recurring events. These include costs incurred for employee
severance, acquisition or divestiture activities, excess facility
costs, certain legal costs, asset related charges and other
expenses associated with business restructuring activities.
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.
(d) Income taxes: Non-GAAP income tax expense is equal to
the Company's projected cash tax expense. Adjustments to GAAP
income tax expense are required to eliminate the recognition of tax
expense from profitable entities where we utilize deferred tax
assets to offset current period tax liabilities. We believe that
providing this non-GAAP figure is useful to our investors as it
more closely represents the true economic impact of our tax
positions.
(e) Gain on the liquidation of foreign subsidiaries: On a
non-recurring basis we have recorded a gain or loss to reflect the
realization of accumulated foreign currency translation adjustments
upon the liquidation of certain international subsidiaries. This
gain or loss represents the net unrealized foreign currency
translation gains or losses accumulated from changes in exchange
rates and the related effects from the translation of assets and
liabilities of these entities. 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) Inventory write-down: This item is not included in
the Company’s ongoing non-GAAP financial measures; however, given
the expected unique and significant nature of the potential
exposure the Company has included this as an additional reconciling
item to its GAAP and non-GAAP results because the Company believes
it enhances the ability of investors to compare the Company's
period-over-period operating results. Both the Company's GAAP and
non-GAAP guidance include an estimated range of $6 million to $7
million in charges for a potential non-cash inventory write-down
which is then further reconciled as an add-back to the Company's
non-GAAP results. This inventory exposure is tied to final product
end-of-life transitions within the Company's legacy embedded
products portfolio that are expected to be finalized during the
third quarter 2017.
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version on businesswire.com: http://www.businesswire.com/news/home/20170801006575/en/
Company ContactRadisys CorporationJon Wilson,
503-615-1685Chief Financial
Officerjon.wilson@radisys.comorInvestor ContactShelton
GroupBrett L. Perry, 214-272-0070bperry@sheltongroup.com
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