Sonus Networks Reports 2015 Second Quarter Results
WESTFORD, Mass., July 29, 2015
Sonus Networks, Inc., a global leader in enabling and securing real-time communications, announced today results for the second quarter ended June 26, 2015.
Second Quarter 2015 Highlights
Total Company revenue was $54.7 million, compared to $75.6 million in the second quarter of 2014. Product revenue was $27.0 million, compared to $45.8 million in the second quarter of 2014. Service revenue was $27.7 million, compared to $29.7 million in the second quarter of 2014. Indirect (channel) represented 26% of product revenue, compared to 29% in the second quarter of 2014. Enterprise represented 22% of product revenue, compared to 20% in the second quarter of 2014. GAAP gross margin was 62.9%; non-GAAP gross margin was 65.9%. GAAP operating expenses were $49.5 million; non-GAAP operating expenses were $40.9 million. GAAP loss per share was $0.31; non-GAAP loss per share was $0.10. Cash and investments were $113.5 million.
Ray Dolan, president and chief executive officer, commented, "Sonus' second quarter results reflect the strength of our technology and the progress we are making against our strategic objectives, including further diversifying our customer base and expanding our presence internationally. I'm very pleased to report that we won two new Tier-1 customers, one in Asia-Pacific and one in Central and Latin America. Our win in Asia-Pacific is in support of SIP Trunking services for one of the largest communication service providers in the region supporting over half a billion mobile subscribers in Asia and Africa. Our win in Central and Latin America is with one of the region's largest mobile operators. Both wins are for our session border control (SBC) solutions and were determined based in large part on the strength of our product and the strength of our team in each of those regions. We also won a multi-million dollar proposal with a global telecommunications operator and IT services company headquartered in Europe which plans to leverage our SBC solution to provide Unified Communications (UC) services to their end customers. Our commercial traction in the second quarter demonstrates that our solutions remain well-aligned with the strategies and growth requirements of our customers and partners."
Mark Greenquist, chief financial officer of Sonus, said, "Gross margin and operating expenses, on a non-GAAP basis, were both better than forecast in the second quarter, allowing us to improve our earnings outlook for the year. Cash and investments of $113.5 million were also better than our forecast. The improvement in our business, particularly compared to the previous quarter, and progress on our cost reduction initiatives enabled us to deliver positive cash flow in the second quarter, which was also ahead of schedule, and improve our earnings expectations for the second half of 2015."
Cost Reduction Program On Track
The anticipated savings associated with the Company's previously announced cost reduction program are on track. The Company continues to expect to achieve approximately $20 million of annualized savings as compared to full year 2014. The Company's net restructuring expense in the second quarter was $1.5 million. This reflects $2.9 million accrued for severance related to the implementation of the cost reduction plan, which was substantially lower than the $5.0 million estimated at the time the initiative was announced, offset by $1.4 million benefit in connection with the termination of a facility lease in Fremont, CA. The Company paid $2.5 million in the second quarter of 2015 for severance-related expenses under this initiative and expects to pay the remaining $0.4 million in the third quarter of 2015.
Cash and Investments
The Company ended the second quarter of 2015 with $113.5 million in cash and investments as compared to cash and investments of $112.8 million at the end of the first quarter of 2015.
Second Quarter Company News
The Company announced several noteworthy commercial relationships and product developments during the second quarter, including:
On May 4, 2015, Sonus announced the completion of its multi-phase virtualization strategy with the introduction of virtual editions of Sonus Insight Element Management System (Insight EMS), Sonus DataStream Integrator (DSI), and Sonus NetScore. Sonus now delivers a completely virtualized product portfolio to service providers and enterprises looking to virtualize their communication networks to help reduce the time, risk and expense of introducing new services within their networks. The portability and flexibility of these products make them the ideal choice when moving to virtualization technology. By using common management and code base, Sonus has provided a low cost path for existing customers as they evolve their networks to virtualization architecture.
Also on May 4, 2015, Sonus introduced new software updates to the Sonus SBC 1000 and Sonus SBC 2000 Session Border Controllers (SBCs), designed to deliver key Microsoft Skype for Business (Enterprise Voice) functionality, as well as strategic enhancements devoted to simplify use, improve call support and bolster security during real-time Internet Protocol (IP) communications. Sonus is focused on helping enterprises optimize Microsoft Skype for Business Enterprise Voice deployments by securing Session Initiation Protocol (SIP) trunking services at the network border and providing a more seamless flow of real-time communications.
On May 6, 2015, Sonus announced it expanded its Alcatel-Lucent CloudBand™ Ecosystem presence with the Sonus Diameter Signaling Controller Software edition (DSC SWe) and Sonus Network-as-a-Service (NaaS) IQ. The Sonus DSC SWe and Sonus NaaS IQ joined the Sonus Session Border Controller Software edition (SBC SWe) with inclusion into the Alcatel-Lucent CloudBand™ Ecosystem. The Alcatel-Lucent CloudBand™ Ecosystem Program is the first open community dedicated to accelerating the market development of Network Functions Virtualization (NFV). Sonus and the NFV community members have focused, and plan to continue to focus, on collaborating and integrating services and solutions to accelerate the adoption of NFV to create new business opportunities across the industry.
Also on May 6, 2015, Sonus announced a relationship with Plantronics, Nectar and Numonix to ensure full interoperability of each companies' Microsoft Skype for Business supported network devices, offering customers a cutting edge partner ecosystem that enables, supports and enhances Microsoft Skype for Business Enterprise Voice deployments.
2015 Third Quarter and Full Year Outlook
The Company's outlook is based on current indications for its business, which is subject to change. Gross margin, operating expenses and earnings (loss) per share are presented on a non-GAAP basis. A reconciliation of the non-GAAP to GAAP outlook and a statement on the use of non-GAAP financial measures are included at the end of this press release.
| Q315 Guidance
| FY15 Guidance
| Total Company Revenue
| Approx. $65 million
| $245 million to $250 million
| Gross Margin1
| 67.5% to 68.5%
| Not provided
| Operating Expenses1
| $40 million to $41 million
| Not provided
| Earnings/(loss) per share1
| $0.05 to $0.08
| $(0.10) to $0.00
| Diluted Shares
| 50.5 million
| 50.0 million
|
1) Presented on a non-GAAP basis. Please see reconciliation in press release appendix. |
