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Radisys Reports Second Quarter 2012 Results

Radisys® and Trillium® are registered trademarks of Radisys.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)

   
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2012   2011 2012   2011
Revenues $ 77,584 $ 79,856 $ 153,071 $ 153,483
Cost of sales:
Cost of sales 48,542 54,933 98,547 107,167
Amortization of purchased technology 2,391   1,163   4,833   2,327  
Gross margin 26,651 23,760 49,691 43,989
Operating expenses
Research and development 11,713 9,600 24,259 18,607
Selling, general and administrative 10,173 10,875 22,173 21,910
Intangible assets amortization 1,304 192 2,608 384
Restructuring and acquisition-related charges, net 1,039   2,481   2,483   2,521  
Income (loss) from operations 2,422 612 (1,832 ) 567
Interest expense (422 ) (456 ) (843 ) (952 )
Other income (expense), net 126  

(12

) 290   (49 )
Income (loss) before income tax expense (benefit) 2,126 144 (2,385 ) (434 )
Income tax expense (benefit) 819   (46 ) 1,123   (95 )
Net income (loss) $ 1,307   $ 190   $ (3,508 ) $ (339 )
 
Net income (loss) per share:
Basic $ 0.05   $ 0.01   $ (0.13 ) $ (0.01 )
Diluted ( I), (II) $ 0.05   $ 0.01   $ (0.13 ) $ (0.01 )
Weighted average shares outstanding
Basic 26,759   24,334   26,708   24,341  
Diluted (I),(II) 28,256   24,475   26,708   24,341  
 

(I) For all periods presented, the computation of diluted earnings per share excludes the effects of the Company's 2013 and 2015 convertible senior notes, as they are anti-dilutive.

(II) For the three months ended June 30, 2012 and 2011, the computation of diluted earnings per share includes the effects of stock options, restricted stock units and escrow shares. For the six months ended June 30, 2012 and 2011, the computation of earnings per share excludes the effects of stock options, restricted stock units and escrow shares, as they are anti-dilutive.

           

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

 

June 30, 2012

December 31, 2011 (a)

 
ASSETS
Current assets:
Cash and cash equivalents $ 45,852 $ 47,770
Accounts receivable, net 48,385 49,212
Inventories and inventory deposit, net 30,740 35,454
Other current assets 14,201   14,623  
Total current assets 139,178 147,059
Property and equipment, net 15,998 15,366
Goodwill and intangible assets, net 107,351 114,791
Other assets, net 19,624   20,057  
Total assets $ 282,151   $ 297,273  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,347 $ 37,874
Deferred income 8,730 11,602
Other accrued liabilities 19,438 27,003
2013 convertible senior notes, net 27,000    
Total current liabilities 93,515   76,479  
2013 convertible senior notes, net

 

45,000
2015 convertible senior notes, net 18,000
Other long-term liabilities 8,420   9,061  
Total liabilities 119,935   130,540  
Shareholders' equity:
Common stock 301,438 301,225
Accumulated deficit (139,720 ) (136,212 )
Accumulated other comprehensive income 498   1,720  
Total shareholders’ equity 162,216   166,733  
Total liabilities and shareholders’ equity $ 282,151   $ 297,273  
 

(a) In accordance with ASC 805-10, the Company's December 31, 2011 balance sheet has been revised to reflect the impact of additional tax-related adjustments to our purchase accounting for Continuous Computing. These adjustments occurred during the measurement period and relate to matters existing on the date of acquisition. Additional discussion of these measurement period adjustments was provided in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.

 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 
 

For the Three Months Ended

 

For the Six Months Ended

June 30, June 30,
2012   2011 2012   2011
Cash flows from operating activities:
Net income (loss) $ 1,307 $ 190 $ (3,508 ) $ (339 )
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 5,692 2,581 11,330 5,214
Stock-based compensation expense (1,506 ) 736 (584 ) 2,137
Other adjustments 1,150 518 1,869 1,103
Changes in operating assets and liabilities:
Accounts receivable (1,074 ) (693 ) 824 (5,893 )
Inventories and inventory deposit (1,121 ) (1,646 ) 3,617 (2,187 )
Accounts payable 2,475 598 979 8,513
Deferred income 208 372 (3,172 ) 2,851
Other operating assets and liabilities (3,015 ) 951   (8,101 ) (1,906 )
Net cash provided by operating activities 4,116   3,607   3,254   9,493  
Cash flows from investing activities:
Capital expenditures (2,257 ) (1,181 ) (5,831 ) (2,142 )
Other investing activities, net       (500 )
Net cash used in investing activities (2,257 ) (1,181 ) (5,831 ) (2,642 )
Cash flows from financing activities:
Repurchases of common stock (1,258 )
Proceeds from issuance of common stock 379 371 810 914
Other financing activities, net (28 ) (23 ) (42 ) (147 )
Net cash provided by (used in) financing activities 351   348   768   (491 )
Effect of exchange rate changes on cash and cash equivalents (199 ) 63   (109 ) 194  
Net increase (decrease) in cash and cash equivalents 2,011 2,837 (1,918 ) 6,554
Cash and cash equivalents, beginning of period 43,841   132,795   47,770   129,078  
Cash and cash equivalents, end of period $ 45,852   $ 135,632   $ 45,852   $ 135,632  
 
 

REVENUES

BY GEOGRAPHY

(In thousands, unaudited)

   
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2012   2011 2012   2011
North America $ 26,391   34.0 % $ 23,903   29.9 % $ 55,952   36.5 % $ 42,949   28.0 %
Europe, the Middle East and Africa (“EMEA”) 12,371 15.9 16,340 20.5 31,819 20.8 41,796 27.2
Asia Pacific 38,822   50.1   39,613   49.6   65,300   42.7   68,738   44.8  
Total $ 77,584   100.0 % $ 79,856   100.0 % $ 153,071   100.0 % $ 153,483   100.0 %
 
   

REVENUES BY PRODUCT GROUP

(In thousands, unaudited)

 
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2012   2011 2012   2011
ATCA Platforms $ 36,518   47.1 % $ 22,891   28.7 % $ 74,181   48.5 % $ 50,460   32.9 %
COM Express and Rackmount Server 11,931 15.4 14,124 17.7 24,103 15.7 27,041 17.6
Software and Solutions (I) 16,102 20.7 9,925 12.4 28,162 18.4 13,533 8.8
Other Products 13,033   16.8   32,916   41.2   26,625   17.4   62,449   40.7  
Total Revenues $ 77,584   100.0 % $ 79,856   100.0 % $ 153,071   100.0 % $ 153,483   100.0 %
 

(I) For the three months and year ended June 30, 2012, Software and Solutions revenues include a reduction in revenue of $111 and $300 for purchase accounting adjustments. Refer to the description of non-GAAP financial measures for detail of this adjustment.

   

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES AND AS A PERCENT OF REVENUES

(In thousands, except per share amounts, unaudited)

 
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2012   2011 2012   2011
REVENUES:
GAAP revenues $ 77,584     $ 79,856     $ 153,071     $ 153,483    
(a) Purchase accounting adjustments 111         300        
Non-GAAP revenues $ 77,695     $ 79,856     $ 153,371     $ 153,483    
 
GROSS MARGIN:
GAAP gross margin $ 26,651   34.4 % $ 23,760   29.8 % $ 49,691   32.5 % $ 43,989   28.7 %
(a) Purchase accounting adjustments 111 300
(b) Amortization of acquired intangible assets 2,391 1,163 4,833 2,327
(c) Stock-based compensation (134 ) 170 (205 ) 355
(d) Restructuring and acquisition-related charges, net 57         62        
Non-GAAP gross margin $ 29,076   37.4 % $ 25,093   31.4 % $ 54,681   35.7 % $ 46,671   30.4 %
 
RESEARCH AND DEVELOPMENT:
GAAP research and development $ 11,713   15.1 % $ 9,600   12.0 % $ 24,259   15.8 % $ 18,607   12.1 %
(c) Stock-based compensation 296     (293 )   (31 )   (606 )  
Non-GAAP research and development $ 12,009   15.5 % $ 9,307   11.7 % $ 24,228   15.8 % $ 18,001   11.7 %
 
SELLING, GENERAL AND ADMINISTRATIVE:
GAAP selling, general and administrative $ 10,173   13.1 % $ 10,875   13.6 % $ 22,173   14.5 % $ 21,910   14.3 %
(c) Stock-based compensation 1,076     (273 )   410     (1,176 )  
Non-GAAP selling, general and administrative $ 11,249   14.5 % $ 10,602   13.3 % $ 22,583   14.7 % $ 20,734   13.5 %
 
INCOME FROM OPERATIONS:
GAAP income (loss) from operations $ 2,422   3.1 % $ 612   0.8 % $ (1,832 ) (1.2 )% $ 567   0.4 %
(a) Purchase accounting adjustments 111 300
(b) Amortization of acquired intangible assets 3,695 1,355 7,441 2,711
(c) Stock-based compensation (1,506 ) 736 (584 ) 2,137
(d) Restructuring and acquisition-related charges, net 1,096     2,481     2,545     2,521    
Non-GAAP income from operations $ 5,818   7.5 % $ 5,184   6.5 % $ 7,870   5.1 % $ 7,936   5.2 %
 
NET INCOME:
GAAP net income (loss) $ 1,307   1.7 % $ 190   0.2 % $ (3,508 ) (2.3 )% $ (339 ) (0.2 )%
(a) Purchase accounting adjustments 111 300
(b) Amortization of acquired intangible assets 3,695 1,355 7,441 2,711
(c) Stock-based compensation (1,506 ) 736 (584 ) 2,137
(d) Restructuring and acquisition-related charges, net 1,096 2,481 2,545 2,521
(e) Income taxes (II) 512     (279 )   645     (319 )  
Non-GAAP net income $ 5,215   6.7 % $ 4,483   5.6 % $ 6,839   4.5 % $ 6,711   4.4 %
 
GAAP weighted average diluted shares 28,256 24,475 26,708 24,341
Escrow shares 1,344
Dilutive equity awards included in
Non-GAAP earnings per share 630 328 814 464
2013 and 2015 convertible senior notes dilutive shares (I) 3,470     3,837         3,837    
Non-GAAP weighted average diluted shares (I) 32,356     28,640     28,866     28,642    
GAAP net income (loss) per share (diluted) $ 0.05 $ 0.01 $ (0.13 ) $ (0.01 )
Non-GAAP adjustments detailed above 0.12    

0.16

    0.37     0.28    
Non-GAAP net income per share (diluted) (I) $ 0.17     $

0.17

    $ 0.24     $ 0.27    
 

(I) For the three months ended June 30, 2012 and 2011, the diluted earnings per share calculation includes interest costs, net of tax benefit, totaling $421 and $456 related to dilutive equity shares underlying our 2013 and 2015 convertible senior notes. For the six months ended June 30, 2012, the diluted earnings per share calculation excludes the effects of the Company's 2013 and 2015 convertible senior notes, as they are anti-dilutive. For the six months ended June 30, 2011, the diluted earnings per share calculation includes interest costs, net of tax benefit, totaling $912 related to dilutive equity shares underlying our 2013 convertible senior notes.

(II) As discussed above, during the period ended June 30, 2012 the Company modified its calculation of Non-GAAP income tax expense. For comparability purposes we have revised all prior periods presented to align with our new methodology. Refer to the following table for impact of this change to prior periods.

     

RECONCILIATION OF CHANGE IN NON-GAAP TAX EXPENSE METHODOLOGY

(In thousands, except per share amounts, unaudited)

 
Q1 2012

As Reported

Adjustment

As Adjusted

 
Non-GAAP income tax expense (benefit) $ 269 $ (98 ) $ 171
Non-GAAP net income 1,526 98 1,624
Non-GAAP net income per share (diluted) 0.05 0.01 0.06
 
         
Q1 2011 Q2 2011 Q3 2011 Q4 2011 FY 2011

As Reported

  Adjustment  

As Adjusted

As Reported

 

Adjustment

 

As Adjusted

As Reported

 

Adjustment

 

As Adjusted

As Reported

 

Adjustment

 

As Adjusted

As Reported

 

Adjustment

 

As Adjusted

 

Non-

GAAP

income

tax

expense

(benefit)

$ (11 ) $ 2 $ (9 ) $ 32 $ 201 $ 233 $ (318 ) $ 539 $ 221 $ 130 $ (57 ) $ 73 $ (167 ) $ 685 $ 518

Non-

GAAP

net

income

2,230 (2 ) 2,228 4,684 (201 ) 4,483 6,551 (539 ) 6,012 1,362 57 1,419 14,828 (685 ) 14,143

Non-

GAAP

net

income

per

share

(diluted)

0.09 0.09 0.18 (0.01 ) 0.17 0.22 (0.02 ) 0.20 0.05 0.05 0.55 (0.02 ) 0.53
 
 

RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE

NET INCOME (LOSS) PER SHARE

(In millions, except per share amounts, unaudited)

   
Three Months Ended
September 30, 2012
Low End High End
GAAP net loss $ (5.2 ) $ (3.6 )
(b) Amortization of acquired intangible assets 3.7 3.7
(c) Stock-based compensation 1.1 1.1
(d) Restructuring and acquisition-related charges, net 1.2 1.2
(e) Income tax effect of reconciling items (0.8 ) (0.7 )
Total adjustments 5.2   5.3  
Non-GAAP net income $ 0.0   $ 1.7  
 
GAAP weighted average shares 27,600 27,600
Non-GAAP adjustments 1,500   1,500  
Non-GAAP weighted average shares (diluted) (I) 29,100   29,100  
 
GAAP net loss per share $ (0.19 ) $ (0.13 )
Non-GAAP adjustments detailed above 0.19   0.19  
Non-GAAP net income per share (diluted) (I) $ 0.00 $ 0.06
 

(I) For the three months ended September 30, 2012 guidance for the diluted earnings per share calculation excludes the effects of the shares underlying our 2013 and 2015 convertible senior notes as the inclusion would be are anti-dilutive.

 

RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE

GROSS MARGIN

(unaudited)

 

Estimates at the midpoint of the guidance range for the

Three Months Ended
September 30, 2012
GAAP 30.2 %
(b) Amortization of acquired intangible assets 3.6
(c) Stock-based compensation 0.2  
Non-GAAP 34.0 %
 
 

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

Three Months Ended
September 30, 2012
GAAP $ 23.4  
(c) Stock-based compensation (0.9 )
Non-GAAP $ 22.5  
 

The Company excludes the following expenses, reversals, gains and losses from its non-GAAP financial measures, when applicable:

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