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Radisys Reports Second Quarter 2012 Results

Radisys ® Corporation (NASDAQ:RSYS), a leading provider of embedded wireless infrastructure solutions for telecom, aerospace, defense and public safety applications, announced revenues for the second quarter of $77.6 million and non-GAAP revenue of $77.7 million. Second quarter GAAP net income was $1.3 million or $0.05 per share and non-GAAP net income was $5.2 million or $0.17 per diluted share. Second quarter non-GAAP results exclude the impact of purchase accounting adjustments, amortization of acquired intangible assets, stock-based compensation, restructuring and acquisition-related charges and non-cash tax expense. A reconciliation of GAAP to non-GAAP results is located in the tables below.

Commenting on the second quarter results, Mike Dagenais, Radisys' Chief Executive Officer, stated, “Our second quarter non-GAAP earnings came in towards the higher end of our expectations. A favorable ATCA customer mix combined with strong Software-Solutions revenue, which was over 20% of total revenue, enabled non-GAAP gross margins of over 37%, our highest level in many years. When combined with tight expense controls, we were able to achieve our expected earnings target despite the lower than expected overall revenue levels.”

Mr. Dagenais continued, “We had another good design win quarter as customers continue to recognize our unique capabilities and are awarding us business in a broad base of applications. In the quarter we had 24 new wins across 21 different customers, 9 of which were new to Radisys. The design wins were a healthy blend between ATCA and Com Express; Com Express in particular had very strong wins across many applications including medical imaging, military communications, and photo radar. In our first year as a combined company, this brings our total design wins to 91 with a value of over $300 million in revenue over the next 5 years.”

Second Quarter Operational Highlights

  • Radisys T-Series ATCA 40G design wins primarily for LTE deployments with several key existing customers.
  • Trillium TOTALeNodeB - awarded best enabling technology at London's Small Cell Forum Industry Awards in June.
  • Trillium TOTALeNodeB - in the final stages of deployment readiness trials with two important customers.
  • MPX-12000, Radisys ATCA based Multimedia Resource function, scheduled to go through a number of lab evaluations with multiple Tier 1 Telecom Equipment Manufacturers as well as Telecom Carriers.
  • MPX-12000 was awarded a 2012 NGN Leadership Award from Internet Telephony and Next Gen Mobility Magazine.

Second Quarter Financial Highlights

  • GAAP revenue was $77.6 million and non-GAAP revenue was $77.7 million. ATCA and Software-Solutions revenues were $52.6 million, up 60% year over year and growing to 68% of total revenue.
  • GAAP gross margin was 34.4%. Non-GAAP gross margin was 37.4% and represents a 6 percentage point increase from the same quarter last year, primarily resulting from improved product mix.
  • Total GAAP Research and Development (R&D) and Selling, General and Administrative (SG&A) expenses were $21.9 million and non-GAAP R&D and SG&A expenses were $23.3 million, relatively flat when compared to the first quarter.
  • Cash from operating activities was $4.1 million and in line with expectations. Cash and cash equivalents were $45.9 million at the end of the second quarter, representing a $2.0 million increase from the prior quarter.

Financial Outlook

Third Quarter 2012 Outlook

  • Revenue: Third quarter revenue is expected to be between $66 million and $72 million. Combined ATCA and Software-Solutions revenue is expected to be down approximately $5 million from the second quarter. A reduction in Other legacy telecommunications revenue comprises the balance of the sequential quarter reduction.
  • Gross Margin: Third quarter non-GAAP gross margin rate is expected to approximate 34%. The expected decrease in gross margin from the second quarter results from lower sequential Software-Solutions revenue.
  • Operating Expenses: Third quarter non-GAAP R&D and SG&A expenses are expected to decrease by approximately $0.5 million from second quarter levels.
  • EPS: Third quarter non-GAAP net income is expected to be between breakeven and $0.06 per diluted share.

Mr. Dagenais went on to say, “Similar to what many others in the telecom and broader macro markets have recently reported, we are seeing growing uncertainty and tangible softening in our market. The softness we're seeing is predominately from our traditionally largest customers and while we're disappointed in these recent market changes, we believe we are very well positioned given our design win performance and new product momentum when the market rebounds.”

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