Sonus Networks Reports 2007 Second Quarter Financial Results
WESTFORD, Mass., Aug. 7 /PRNewswire-FirstCall/ -- Sonus Networks, Inc.
(Nasdaq: SONS), a leading supplier of service provider Voice over IP (VoIP)
infrastructure solutions, today reported its financial results for the second
quarter ended June 30, 2007.
Revenues for the second quarter of fiscal 2007 were $75.5 million compared
with $71.1 million in the first quarter of fiscal 2007 and $64.5 million for the
second quarter of fiscal 2006. Net loss for the second quarter of 2007 was $7.0
million, or $0.03 per share. This compared to a net loss of $4.0 million in the
first quarter of 2007, or $0.02 per share, and net income of $8.9 million for
the second quarter of 2006, or $0.03 per diluted share.
Financial results included stock-based compensation and related expenses,
stock option review costs, withholding tax adjustments and amortization of
intangible assets of $18.8 million in the second quarter of 2007, $13.8 million
in the first quarter of 2007 and $2.8 million in the second quarter of 2006 on a
pre-tax basis.
Revenues for the first six months of fiscal 2007 were $146.6 million
compared with $124.5 million in the same period last year. Net loss for the
first six months of fiscal 2007 was $11.0 million or $0.04 per share compared
with net income for the first six months of fiscal 2006 of $14.7 million or
$0.06 per diluted share.
Financial results included stock-based compensation and related expenses,
stock option review costs, withholding tax adjustments and amortization of
intangible assets of $32.6 million in the first six months of fiscal 2007 and
$5.3 million in the first six months of 2006 on a pre-tax basis.
The Company has provided additional supplemental financial information for
Q2 2007 on its website at
http://www.sonusnet.com/contents/corporate/investorrelations.cfm.
"Sonus achieved 17.8% year-on-year revenue growth during the first six
months of 2007 as a result of our continued leadership in the expanding IP-voice
market and our strengthening position in the industry," said Hassan Ahmed,
Chairman and CEO. "The spirit of innovation and customer commitment continues to
thrive at Sonus, and we are proud to count the world's five largest operators as
customers. During the second quarter, we made significant strides in the
wireless industry as we acquired privately-held Zynetix. We also delivered new
features and capabilities for our core trunking and access solutions. Sonus is a
pioneer in the IP-Voice market and our continual innovation differentiates our
company in one of the most rapidly growing segments of the telecommunications
industry."
Sonus Networks also announced today that President and Chief Operating
Officer, Bert Notini, will be leaving the company to join New Mountain Capital,
LLC as a Senior Advisor and to become the Chief Executive Officer of one of its
portfolio companies, Apptis Inc. Notini has been president and COO of the
Company since April 2004, and has been a member of the Board of Directors since
2003. New Mountain Capital LLC, is a New York based private equity and public
equity fund with aggregate assets under management totaling more than $3.3
billion. Apptis, Inc. is a rapidly growing IT and communications systems
integrator based in northern Virginia that provides a range of critical
networking and security solutions to the U.S. federal government and its
agencies. Notini is currently Chairman of the Board of Directors of Apptis and
also serves on the Board of Directors for Deltek Systems Inc., another New
Mountain Capital portfolio company.
"I'm extremely proud to have been a part of the Sonus team for the past
four years, a critical period where both the company and the industry have seen
strong growth and change," said Notini. "Sonus is an established market leader
with exceptional prospects and the ability to meet the needs of the world's
largest operators. I'm confident in the company's ability to lead the continued
transformation of the world's communications networks and look forward to my new
roles at New Mountain Capital and Apptis."
Second Quarter Fiscal 2007 Business Highlights:
In Q2 2007, Sonus Networks continued to partner with the world's largest
and most innovative network operators. Sonus announced that the Company is
partnering with France Telecom International Wholesale Division to build a
robust IP-based network. With the addition of France Telecom to its roster of
announced customers, Sonus Networks is now actively deployed in all five of the
world's largest network operators. The Company also announced new deployments
for complete IP-based voice networks with Veracity Communications, which is
offering a Sonus-based Voice over Broadband solution, and CommPartners, a
nationwide CLEC-certified, facilities-based network operator providing VoIP and
TDM services to carriers as well as enhanced hosted applications to small- and
medium-sized businesses.
In addition to winning new business with leading network operators
globally, Sonus continues to earn praise from existing customers for the
Company's ability to build and support the world's largest, most scalable IP
voice networks. In June, Sonus was recognized by AT&T as an outstanding supplier
to AT&T, one of the world's leading data, voice, wireless and Internet services
providers, for its ongoing commitment to excellence.
Reflecting the Company's heritage of technology innovation leadership and
recent efforts to drive the adoption of IP solutions to the edge of wireless
voice networks, Sonus also announced that it is collaborating in SOFTBANK
Group's demonstration of femtocell technologies. This groundbreaking technology
leverages in-home base stations connected to an IP core network infrastructure
to deliver indoor wireless coverage; to lay the foundation for the delivery of
converged voice, data and multimedia services to end users on their mobile
devices; and to enable network operators to leverage IP transport to run their
networks more efficiently. This burgeoning market represents one of the
strategic growth areas Sonus is pursuing. Partnering with leading network
operators like SBB, Sonus is establishing itself as an early leader.
Sonus' leadership position across the industry was validated by respected
third party research firms in Q2. Synergy Research Group and Infonetics both
published reports naming Sonus a market share leader in key segments of the IP
voice market, and iLocus Research reaffirmed Sonus leadership in minutes of IP
voice traffic, noting that Sonus carries approximately 4 out of 10 long distance
IP voice minutes. In addition, Gartner's "Magic Quadrant for Softswitch
Architecture, 2007" report (Bettina Tratz-Ryan, et al, March 2007), which ranks
vendors in the IP-based voice industry, positioned Sonus in the "Leader"
quadrant.
Sonus maintains its industry leading position through continual
development of its solutions, whether organically or through partnerships with
other innovative technology vendors. Sonus is committed to evolving its platform
to keep pace with emerging communications trends that embrace lifestyle-driven
features such as mobility, personalization, and presence, while continuing to
give network operators new operating leverage. In April, the Company introduced
new support for the Electronic Number Mapping System (ENUM), a number mapping
solution designed to streamline the convergence of IP-Based voice networks with
the Public Switched Telephony Network (PSTN) and facilitate seamless IP-to-IP
peering. The Company also announced new partnerships with companies such as
Operax, a leading vendor of Network Service Quality control solutions, to
facilitate faster service creation and superior service quality essential to
protecting the consumer experience; Neustar, to create feature-rich IP
Multimedia Subsystem (IMS)-based consumer applications with presence technology;
and PCTel, to enable the delivery of broadband mobile converged services
leveraging dual mode handsets.
"We're at the point in the telecommunications industry where the business
case for investing in IP voice infrastructure has moved beyond simple
operational cost-savings," continued Ahmed. "Network operators are pushing IP
further and further to the edge of their networks to touch the consumer with
rich, multimedia applications and services, new innovations in wireless
technology, and better overall service. For the past ten years, Sonus has led
the evolution to IP, and as network operators globally embrace the
transformative power of IP, Sonus continues to be recognized as the preeminent
provider of next-generation solutions."
About Sonus Networks
Sonus Networks, Inc. is a leading provider of voice over IP (VoIP)
infrastructure solutions for wireline and wireless service providers. With its
comprehensive IP Multimedia Subsystem (IMS) solution, Sonus addresses the full
range of carrier applications, including residential and business voice
services, wireless voice and multimedia, trunking and tandem switching, carrier
interconnection and enhanced services. Sonus' voice infrastructure solutions are
deployed in service provider networks worldwide. Founded in 1997, Sonus is
headquartered in Westford, Massachusetts. Additional information on Sonus is
available at http://www.sonusnet.com.
This release contains forward-looking statements regarding future events
that involve risks and uncertainties. Readers are cautioned that these
forward-looking statements are only predictions and may differ materially from
actual future events or results. Readers are referred to Item 1A "Risk Factors"
of Sonus' Quarterly Report on Form 10-Q for the first quarter of 2007, filed
with the SEC, which identifies important risk factors that could cause actual
results to differ from those contained in the forward-looking statements. Risk
factors include among others: the impact of material weaknesses in our
disclosure controls and procedures and our internal control over financial
reporting on our ability to report our financial results timely and accurately;
the unpredictability of our quarterly financial results; whether the Company
will remain listed on the NASDAQ Global Select Market; regulatory actions or
litigation arising out of the Company's voluntary stock option review and
related restatement; risks associated with our international expansion and
growth; consolidation in the telecommunications industry; and potential costs
resulting from pending securities litigation against the company. Any
forward-looking statements represent Sonus' views only as of today and should
not be relied upon as representing Sonus' views as of any subsequent date. While
Sonus may elect to update forward-looking statements at some point, Sonus
specifically disclaims any obligation to do so.
Sonus is a registered trademark of Sonus Networks. All other company and
product names may be trademarks of the respective companies with which they are
associated.
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three months Three months Three months
ended ended ended
June 30, March 31, June 30,
2007 2007 2006
Revenue:
Product $ 52,171 $ 51,627 $ 48,853
Service 23,322 19,519 15,627
Total revenue 75,493 71,146 64,480
Cost of revenue:
Product 23,561 17,082 16,199
Service 9,563 8,579 6,987
Total cost of revenue 33,124 25,661 23,186
Gross profit 42,369 45,485 41,294
Gross profit %
Product 54.8% 66.9% 66.8%
Service 59.0% 56.0% 55.3%
Total gross profit 56.1% 63.9% 64.0%
Operating expenses:
Research and development 22,350 18,698 12,900
Sales and marketing 21,219 23,050 15,646
General and administrative 14,202 14,062 7,248
Total operating expenses 57,771 55,810 35,794
Income (loss) from operations (15,402) (10,325) 5,500
Interest expense (79) (4) (81)
Interest income 4,522 4,624 3,899
Other income (expense), net (256) (680) --
Income (loss) before income taxes (11,215) (6,385) 9,318
Income tax benefit (provision) 4,239 2,407 (404)
Net income (loss) $ (6,976) $ (3,978) $ 8,914
Net income (loss) per share:
Basic $ (0.03) $ (0.02) $ 0.04
Diluted $ (0.03) $ (0.02) $ 0.03
Shares used in computing net income
(loss) per share:
Basic 259,786 259,768 252,664
Diluted 259,786 259,768 256,326
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Six months Six months
ended ended
June 30, June 30,
2007 2006
Revenue:
Product $ 103,798 $ 93,395
Service 42,841 31,080
Total revenue 146,639 124,475
Cost of revenue:
Product 40,643 32,082
Service 18,142 13,716
Total cost of revenue 58,785 45,798
Gross profit 87,854 78,677
Gross profit %
Product 60.8% 65.6%
Service 57.7% 55.9%
Total gross profit 59.9% 63.2%
Operating expenses:
Research and development 41,048 25,976
Sales and marketing 44,269 29,671
General and administrative 28,264 14,228
Total operating expenses 113,581 69,875
Income (loss) from operations (25,727) 8,802
Interest expense (83) (218)
Interest income 9,146 7,341
Other income (expense), net (936) --
Income (loss) before income taxes (17,600) 15,925
Income tax benefit (provision) 6,646 (1,195)
Net income (loss) $ (10,954) $ 14,730
Net income (loss) per share:
Basic $ (0.04) $ 0.06
Diluted $ (0.04) $ 0.06
Shares used in computing net income
(loss) per share:
Basic 259,777 251,371
Diluted 259,777 255,454
SONUS NETWORKS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
June 30, December 31,
2007 2006
Assets
Current assets:
Cash and cash equivalents $ 61,617 $ 44,206
Marketable debt securities 243,605 256,485
Accounts receivable, net 72,438 70,726
Inventory, net 33,177 22,266
Deferred income taxes 21,833 21,808
Other current assets 27,178 18,523
Total current assets 459,848 434,014
Property and equipment, net 20,174 19,051
Purchased intangible assets, net 2,900 --
Goodwill 7,841 --
Long-term investments 39,470 60,189
Deferred income taxes 46,968 52,613
Other assets 20,744 23,737
$ 597,945 $ 589,604
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 24,989 $ 17,219
Accrued expenses 36,950 43,653
Accrued restructuring expenses -- 61
Current portion of deferred revenue 55,270 60,383
Current portion of long-term
liabilities 1,630 501
Total current liabilities 118,839 121,817
Long-term deferred revenue 31,319 33,787
Deferred income taxes 912 --
Long-term liabilities, net of current
portion 2,748 1,467
Total liabilities 153,818 157,071
Commitments and contingencies
Stockholders equity:
Common stock 262 262
Additional paid-in capital 1,183,548 1,160,853
Accumulated deficit (739,237) (728,233)
Accumulated other comprehensive
loss (179) (82)
Treasury stock (267) (267)
Total stockholders' equity 444,127 432,533
$ 597,945 $ 589,604
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six months ended
June 30,
2007 2006
Cash flows from operating activities:
Net income (loss) $ (10,954) $ 14,730
Adjustments to reconcile net income
(loss) to cash flows provided by
operating activities:
Depreciation and amortization of
property and equipment 6,351 4,732
Amortization of purchased
intangible assets 141 --
Stock-based compensation 23,486 5,042
Loss on disposal of property and
equipment -- 6
Increase in fair value of modified
stock options held by former employees 936 --
Deferred income taxes 5,645 --
Changes in operating assets and
liabilities:
Accounts receivable (1,261) (5,162)
Inventory (10,579) 4,170
Other operating assets (5,693) (7,812)
Accounts payable 6,541 (3,712)
Accrued expenses, deferred rent
and accrued restructuring
expenses (6,901) 52
Deferred revenue (7,377) (6,661)
Net cash provided by operating
activities 335 5,385
Cash flows from investing activities:
Purchases of property and equipment (7,138) (5,163)
Acquisition of Zynetix Limited (8,825) --
Maturities of available-for-sale
marketable debt securities 38,158 68,775
Purchases of available-for-sale
marketable debt securities (36,008) (31,175)
Maturities of held-to-maturity
marketable debt securities and
long-term investments 170,000 58,006
Purchases of held-to-maturity
marketable debt securities and
long-term investments (138,551) (225,007)
Decrease in restricted cash 261 250
Net cash provided by (used in)
investing activities 17,897 (134,314)
Cash flows from financing activities:
Sale of common stock in connection
with employee stock purchase plan -- 2,310
Proceeds from exercise of stock
options -- 11,386
Repayment of convertible
subordinated note -- (10,000)
Repayment of notes due to Zynetix
Limited shareholders (335) --
Payment of tax withholding
obligations related to net share
settlement of restricted (300) --
stock award
Principal payments of capital lease
obligations (73) (23)
Net cash provided by (used in)
financing activities (708) 3,673
Effect of exchange rate changes on
cash and cash equivalents (113) (40)
Net increase (decrease) in cash and
cash equivalents 17,411 (125,296)
Cash and cash equivalents, beginning
of period 44,206 155,679
Cash and cash equivalents, end of
period $ 61,617 $ 30,383
For more information, please contact:
Investor Relations: Media Relations:
Jocelyn Philbrook Sarah McAuley
978-614-8672 978-614-8745
jphilbrook@sonusnet.com smcauley@sonusnet.com