- Stronger than expected preliminary third
quarter 2011 revenues and earnings
- Received a $20 million Diameter Signaling
Router related order, the largest Diameter Signaling Router order
in the Company's history
- Expects to increase guidance ranges for the
year on the November 9, 2011 earnings
call
Tekelec (NASDAQ: TKLC), the mobile broadband solutions company,
issued preliminary third quarter 2011 results and announced it
plans to release final financial results for third quarter 2011 on
November 9, 2011 before market open.
Preliminary Third Quarter 2011 Results The
Company expects orders will be between $66 million and $68 million
for the third quarter of 2011, resulting in a range of $201 million
to $203 million for the nine months ended September 30, 2011. The
Company received a Diameter Signaling Router ("DSR") related order
in the amount of approximately $20 million in early October which
was previously expected to be received in the third quarter. This
order represents the single largest Broadband Network Solutions
order in the Company's history and the Company believes it
demonstrates the continued traction the Company's products are
gaining in the early adoption phase of DSR technology.
Revenues for the third quarter 2011 are expected to be between
$103 million and $106 million, bringing the total revenues for the
nine months ended September 30, 2011 to between $307 million and
$310 million. Due to higher than expected "book-ship" Eagle 5
revenue, the Company expects non-GAAP gross margins for the third
quarter 2011 to be in the 67%-68% range and GAAP gross margins for
the third quarter to be in the range of 59%-60%.
The Company expects non-GAAP earnings per share to range between
$0.16 and $0.20 per diluted share for the third quarter 2011, and
$0.33 to $0.37 per diluted share for the nine months ended
September 30, 2011. The Company expects GAAP earnings per share to
range between a loss of $0.01 per share and a profit of $0.03 per
diluted share for the third quarter 2011 and a loss of $0.34 to a
loss of $0.30 per share for the nine months ended September 30,
2011.
The Company ended the third quarter of 2011 with $270 million in
cash and no debt. The Company generated $10 million to $13 million
of cash flows from operations in the third quarter of 2011 and $58
million to $61 million of cash flows from operations as of the nine
months ended September 30, 2011.
Because financial statements for the third quarter and nine
months ended 2011 are not yet available, these third quarter and
nine month estimates are preliminary, unaudited, subject to
completion, reflective of the Company's current best estimates and
may be revised as a result of management's further review. During
the course of the preparation of consolidated financial statements
and related notes, the Company may identify items that would
require material adjustments to the preliminary financial
information presented above.
Based on the Company's year-to-date financial performance
through September 30, 2011 and current expectations for the fourth
quarter of 2011, the Company expects that on November 9, 2011 it
will raise both the bottom and top ends of the full year guidance
ranges for revenues, gross margins, earnings and cash flows from
operations.
The previous guidance provided by the Company on August 4, 2011
is presented in the table below:
2011 Previous
Guidance as of
August 4, 2011
-----------------------------------
Revenues (Millions) $360 - $400
Non-GAAP Gross Margin % * 59% - 62%
Non-GAAP Diluted EPS ** $0.22 - $0.32
GAAP EPS ($0.58) - ($0.48)
* Of the adjustments listed below, approximately $2 Million of stock-based
compensation and $27 Million of amortization of intangibles will impact
GAAP gross margins.
** Non-GAAP guidance excludes an estimated $10 Million, of stock-based
compensation, $38 Million of amortization of intangible assets and
acquisition-related expenses, and $26 Million of restructuring charges.
Each of these, net of the associated tax impact, are included in GAAP EPS.
The estimated net tax impact of the GAAP adjustments is $24 Million.
Conference Call Tekelec has scheduled a
conference call for Wednesday, November 9, 2011 at 8 a.m. ET for
management to discuss its third quarter 2011 results. The Company
also plans to provide both GAAP and non-GAAP numbers (including
GAAP reconciliations) on its website immediately prior to the call,
and to discuss during this call certain forward-looking information
concerning management's outlook for the business.
"Live" Webcast and Replay Tekelec will
host a live webcast of its conference call on Wednesday, November
9, 2011, at 8 a.m. ET. To access the webcast, visit Tekelec's
website located at www.tekelec.com, enter the Investor Relations
section and click on the webcast icon. A webcast replay will be
available at approximately 11 a.m. ET on November 9, 2011 and for
90 days thereafter.
Telephone Replay A telephone replay of the
call also will be available for one week after the live webcast by
calling either (855) 859-2056 or (404) 537-3406 and entering the
conference ID #20072653.
Non-GAAP Information Certain non-GAAP
financial measures are included in this press release. In the
calculation of these measures, Tekelec generally excludes certain
items such as amortization of acquired intangibles, restructuring
and other charges, non-cash stock-based compensation charges, and
unusual, non-recurring gains and charges. Tekelec believes that
excluding such items provides investors and management with a
representation of the Company's core operating performance and with
information useful in assessing its prospects for the future and
underlying trends in Tekelec's operating expenditures and
continuing operations. Management uses such non-GAAP measures to
(i) evaluate financial results, (ii) manage the Company's
operations, and (iii) establish operational goals. Further,
non-GAAP measures are utilized by the Company's management and
board of directors to assist in determining incentive compensation
and evaluating key trends within the business. In addition, since
the Company has historically reported non-GAAP measures to the
investment community, the Company believes the inclusion of this
information provides consistency in our financial reporting. The
release and the attachments to this release provide a
reconciliation of each of the non-GAAP measures referred to in this
release to the most directly comparable GAAP measure. The non-GAAP
financial measures are not meant to be considered a substitute for
the corresponding GAAP financial measures.
Forward-Looking Statements Certain
statements made in this press release, including expected third
quarter results and expected changes to 2011 Guidance, are
forward-looking, reflect the Company's current intent, belief or
expectations and involve certain risks and uncertainties. The
Company's actual future performance may differ materially from such
expectations as a result of important risk factors, which include,
in addition to those identified in the Company's 2010 Form 10-K,
2011 First and Second Quarter Forms 10-Q and its other filings with
the Securities and Exchange Commission, changes resulting from
management's further review of operational and financial results,
customary financial close processes and the completion of the final
financial statements, the rate and size of decline in demand for
our older SS7-based products from which we still derive a
substantial portion of our revenues; the effects on our revenue
performance of our year-over-year decline in orders in 2010 and the
increasing portion of our orders that are for newer products with
longer order-to-revenue conversion cycles and lower margins on
initial sales; our increasing dependence on next generation
products with which we have less experience forecasting, building,
and selling and for which the markets are less mature and more
subject to demand and technology changes and increased competition;
the effects of an increase in cost associated with selling our
next-generation products including the cost associated with
customer trials and lab systems, the risk that we may experience
detrimental effects, such as employee distraction and litigation,
from our 2011 restructuring activities, or may not realize the
benefits of such activities, including as a result of delays
resulting from the Company's complying with and undertaking, or its
noncompliance with, any necessary individual and collective
employee information and consultation obligations; the difficulty
we may have in transitioning from a hardware-centric to a
software-centric business; any adverse outcome from or effects of
the securities litigations we currently have filed against us or
other current or threatened litigation; the current or further
detrimental changes in general economic, social, or political
conditions in the countries in which we operate including the
impact of credit availability and other economic factors on overall
capital spending by our customers and resulting pressure on us to
lower our prices; our ability to compete with other manufacturers
that have lower cost bases than ours, are partially supported by
foreign governments, and/or employ unfair trade practices; risks
related to our international sales, markets and operations,
including but not limited to: import regulations, limited
intellectual property protection (including protection of our
software source code), increased costs and potential liabilities
related to compliance with current and future security provisions
in customer contracts and regulations, and security, access, and
other regulatory requirements imposed by governments, including in
particular the government of India; exposure to increased bad debt
expense and product and service disputes as a result of general
economic conditions; the timeliness and functional competitiveness
of our product releases, the timing and size of any increase in
demand for our performance management, SIP, Diameter, policy and
subscriber database products; the risk of infringing on, and
litigating with others regarding their, intellectual property
rights; the timing of our recognition of revenues; the extent to
which any customer outsourcing to our competitors or supplier
consolidation increases the influence of competitors on our
customers' purchases; our ability to protect intellectual property
rights; our ability to maintain OEM, partner, reseller, and vendor
support and supply relationships; and changes in the market price
of the Company's common stock. The Company undertakes no obligation
to publicly update any forward-looking statements whether as a
result of new information, future events or otherwise.
About Tekelec Tekelec connects people and
devices to the mobile Internet. Our portfolio's unique layer of
network intelligence allows service providers to both manage and
monetize the exponential growth in mobile web, video and
applications traffic. Tekelec has more than 25 offices around the
world serving customers in more than 100 countries. For more
information, please visit www.tekelec.com.
TEKELEC PRELIMINARY ACTUAL RESULTS (UNAUDITED)
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
for the Three Months Ended September 30, 2011
Low High
------------------------ ------------------------
% of % of
Amount revenues Amount revenues
----------- ----------- ----------- -----------
(Thousands, except percentages)
Revenues $ 103,000 $ 106,000
Gross margins $ 60,500 59% $ 63,500 60%
Adjustments:(6)
Amortization of
intangible assets(1) 8,100 8% 8,100 8%
Stock-Based
Compensation(2) 200 0% 200 0%
----------- ----------- ----------- -----------
Non-GAAP gross margins $ 68,865 67% $ 71,800 68%
=========== =========== =========== ===========
Low High
------------------------ ------------------------
% of % of
Amount revenues Amount revenues
----------- ----------- ----------- -----------
(Thousands, except percentages)
Operating income (loss) $ 1,165 1% $ 5,100 5%
Adjustments:(6)
Amortization of
intangible assets(1) 9,850 10% 9,850 9%
Stock-Based
Compensation(2) 2,500 2% 2,500 2%
Acquisition related
cash bonus(3) 325 0% 325 0%
Restructuring and
other(4) 4,000 4% 4,000 4%
----------- ----------- ----------- -----------
Non-GAAP operating
margin $ 17,840 17% $ 21,775 21%
=========== =========== =========== ===========
Low High
------------------------ ------------------------
per diluted per diluted
Amount share Amount share
----------- ----------- ----------- -----------
(Thousands, except per share data)
Net income (loss) $ (608) $ (0.01) $ 1,950 $ 0.03
Adjustments:(6)
Amortization of
intangible assets(1) 9,850 0.14 9,850 0.14
Stock-Based
Compensation(2) 2,500 0.04 2,500 0.04
Acquisition related
cash bonus(3) 325 0.00 325 0.00
Restructuring and
other(4) 4,000 0.06 4,000 0.06
Provision for (benefit
from) income taxes(5) (4,800) (0.07) (4,800) (0.07)
----------- ----------- ----------- -----------
Non-GAAP net income $ 11,267$ 0.16 $ 13,825 $ 0.20
=========== =========== =========== ===========
Weighted average number
of shares outstanding:
Basic 69,215 69,215
Diluted 69,333 69,333
(1) The adjustments represent the amortization of purchased technology and
other intangibles related to acquired companies.
(2) The adjustments represent stock-based compensation expense recognized
related to awards of stock options, restricted stock or restricted stock
units or stock appreciation rights granted under our equity incentive
plans and stock purchase rights granted under our employee stock purchase
plan.
(3) The 2011 adjustment represents consideration payable to former Camiant
employees for options not assumed in the merger.
(4) The adjustment represents the elimination of the costs associated with
our restructuring activities.
(5) The adjustment represents the income tax effect of footnotes (1), (2),
(3), and (4) in order to reflect our non-GAAP effective tax rate of 33%.
(6) Adjustments are point estimates and actual results may vary from these
point estimates.
TEKELEC PRELIMINARY ACTUAL RESULTS (UNAUDITED)
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
for the Nine Months Ended September 30, 2011
Low High
------------------------ ------------------------
% of % of
Amount revenues Amount revenues
----------- ----------- ----------- -----------
(Thousands, except percentages)
Revenues $ 307,000 $ 310,000
Gross margins $ 169,000 55% $ 172,000 55%
Adjustments:(6)
Amortization of
intangible assets(1) 23,042 8% 23,042 7%
Stock-Based
Compensation(2) 779 0% 779 0%
Acquisition related
cash bonus(3) 107 0% 107 0%
----------- ----------- ----------- -----------
Non-GAAP gross margins $ 192,928 63% $ 195,928 63%
=========== =========== =========== ===========
Low High
------------------------ ------------------------
% of % of
Amount revenues Amount revenues
----------- ----------- ----------- -----------
(Thousands, except percentages)
Operating income (loss) $ (30,000) -10% $ (26,000) -8%
Adjustments:(6)
Amortization of
intangible assets(1) 28,342 9% 28,342 9%
Stock-Based
Compensation(2) 7,833 3% 7,833 3%
Acquisition related
cash bonus(3) 1,017 0% 1,017 0%
Restructuring and
other(4) 27,341 9% 27,341 9%
----------- ----------- ----------- -----------
Non-GAAP operating
margin $ 34,533 11% $ 38,533 12%
=========== =========== =========== ===========
Low High
------------------------ ------------------------
per diluted per diluted
Amount share Amount share
----------- ----------- ----------- -----------
(Thousands, except per share data)
Net income (loss) $ (23,250) $ (0.34) $ (20,500) $ (0.30)
Adjustments:(6)
Amortization of
intangible assets(1) 28,342 0.41 28,342 0.41
Stock-Based
Compensation(2) 7,833 0.11 7,833 0.11
Acquisition related
cash bonus(3) 1,017 0.01 1,017 0.01
Restructuring and
other(4) 27,341 0.39 27,341 0.39
Provision for (benefit
from) income taxes(5) (18,728) (0.27) (18,728) (0.27)
----------- ----------- ----------- -----------
Non-GAAP net income $ 22,555 $ 0.33 $ 25,305 $ 0.37
=========== =========== =========== ===========
Weighted average number
of shares outstanding:
Basic 69,013 69,013
Diluted 69,223 69,223
(1) The adjustments represent the amortization of purchased technology and
other intangibles related to acquired companies.
(2) The adjustments represent stock-based compensation expense recognized
related to awards of stock options, restricted stock or restricted stock
units or stock appreciation rights granted under our equity incentive
plans and stock purchase rights granted under our employee stock purchase
plan.
(3) The 2011 adjustment represents consideration payable to former Camiant
employees for options not assumed in the merger.
(4) The adjustment represents the elimination of the costs associated with
our restructuring activities.
(5) The adjustment represents the income tax effect of footnotes (1), (2),
(3), and (4) in order to reflect our non-GAAP
effective tax rate of 30%.
(6) Adjustments are point estimates and actual results may vary from these
point estimates.
Contact: Kyle Macemore Vice President Finance and
Investor Relations o) +1.919.380.6148 Email Contact
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