2007'02.01.Thu
Sonus Networks Reports 2006 First Quarter Results
PR
May 09, 2006
Record First Quarter Revenues Increased 78% Annually; EPS of $0.02 Reflects $0.01 Per Share for Stock-Based Compensation Expense
CHELMSFORD, Mass., May 9 /Xinhua-PRNewswire/ -- Sonus
Networks, Inc. (Nasdaq: SONS), a leading supplier of
service provider Voice over IP (VoIP) infrastructure
solutions, today reported its financial results for the
first quarter ended March 31, 2006.
Revenues for the first quarter of fiscal 2006 were $60
million, compared with $57.2 million in the fourth quarter
of fiscal 2005 and $33.6 million for the first quarter of
fiscal 2005.
Net income on a GAAP basis for the first quarter of
2006 was $5.7 million or $0.02 per share. Excluding
stock-based compensation expense of $1.9 million, non-GAAP
net income for the first quarter of 2006 was $7.6 million
or $0.03 per share, compared with a net loss of $3.7
million or $0.01 per share for the first quarter of 2005.
"Q1 was another solid quarter for Sonus. We
reported record quarterly revenues and healthy cash flow
from operations, while making strides toward achieving our
long-term financial model," said Hassan Ahmed,
chairman and CEO, Sonus Networks. "Our laser-focused
mission to expand our presence around the globe and execute
on our strategy generated results that went well beyond our
financial performance for the quarter. We unveiled eight
new deployments with operators globally, delivered the
latest version of our industry-leading software, extended
our wireless solutions, and bolstered our renowned Open
Services Partner Alliance by announcing interoperability
with some of the largest consumer brands. We are proud of
our leadership position in the market and our ability to
help the world's network operators deliver communications
services that will enhance the consumer experience and
improve service providers' business models."
With the adoption of Statement of Financial Accounting
Standards No. 123R (FAS 123R) as of January 1, 2006, Sonus
Networks is reporting stock-based compensation expense
under FAS 123R in its generally accepted accounting
principles (GAAP) results for the first time. Sonus
recorded $1.9 million of stock-based compensation on its
condensed consolidated statement of operations for the
three months ended March 31, 2006.
The financial statements attached to this press release
present both GAAP net income and net income excluding this
stock-based compensation expense. The reconciliation
between GAAP and non-GAAP net income is provided in a table
immediately following the GAAP Condensed Consolidated
Statements of Operations.
Sonus reported today that the company has completed two
years of selling its products through its reseller,
Motorola, Inc., and, as a result of its positive history
with Motorola, is now reporting this revenue on a sell-in
basis where revenue is recognized upon the shipment of
products to Motorola, resulting in approximately an
additional $3 million in revenue being recognized in the
first quarter of fiscal 2006. Sonus' Quarterly Report on
Form 10-Q filed today provides further details.
"We are very pleased that our focus on
strengthening our relationship with Motorola and the
positive experience we have had over the past two years has
allowed us to take one more step in improving the
transparency and efficiency of our revenue conversion
cycle, which will benefit our shareholders," said Bert
Notini, president and COO, Sonus Networks.
In Q1 2006, Sonus announced new or expanded customer
relationships with eight of the world's most innovative
service providers. In North America, Vonage Network, a
subsidiary of Vonage Holdings Corp., deployed Sonus'
industry-leading IP Multimedia Subsystem (IMS)-ready
solution to support traffic from their rapidly growing
subscriber base. Vonage is a leading provider of broadband
telephone services with over 1.6 million subscriber lines as
of April 1, 2006. Also in the United States, Sonus
announced that West Interactive Corporation and 360networks
Corporation each selected Sonus' IMS-ready architecture as
the foundation for their next generation IP-based voice
service. Sonus announced that Intrado Inc., a global
provider of integrated data and telecommunications
solutions, has tapped Sonus to provide key elements of its
IMS-ready architecture to support Intrado's nationwide
expansion of its V9-1-1(R) Services.
Sonus also continued to extend its leadership position
in Japan during Q1. The Company announced that KDDI, a
leading telecommunication service provider in Japan,
selected it as the exclusive vendor for its
convergence-enabled packet voice network. The new packet
voice network will deliver enhanced voice services to a key
market that is at the forefront of technology adoption. It
is planned to be the largest IP telephony network in Japan
with KDDI aiming to have 100 percent of its long-distance
traffic on a Sonus-based VoIP network by 2008. Sonus
announced its first Japanese wireless customer, WILLCOM,
Inc., a major provider of wireless data and voice services
and the largest operator employing Personal Handyphone
System (PHS) technology in Japan. JAPAN TELECOM Co., Ltd.,
one of Japan's largest carriers and a wholly owned
subsidiary of SOFTBANK Corp., also announced that it
selected Sonus as the foundation for its next-generation
IP-based voice network.
Sonus' partnerships with the leading service providers
throughout Japan solidified the Company's position as the
market leader. According to a report issued by Synergy
Research Group, for the full year 2005, Sonus led the
Japanese market with a 36.1% market share position, more
than double any other equipment provider. Sonus also
accounted for approximately 76% of the Japanese high
density gateway market and more than 61% of the total
Japanese gateway market in 2005.
Globally, Sonus continued to be recognized as a market
share leader in IP-based voice solutions. By the end of
Q1, voice traffic being carried over Sonus' solutions
reached approximately 19 billion minutes per month. In
recognition of Sonus' leadership position, Frost &
Sullivan awarded the Company the 2006 IP Communications
Carrier Infrastructure Technology Innovation &
Leadership of the Year Award, an award that is presented to
the company that has excelled delivering advanced
telecommunications solutions to the market, enabling the
seamless evolution of voice networks.
Recognizing that application delivery is a key
competitive differentiator for today's carriers, Sonus
continued to leverage its industry-leading partner program,
the Open Services Partner Alliance (OSPA) to deliver greater
value to its customers. In Q1, the Company announced that
it extended its partnership with IP Unity to deliver a
suite of enhanced services as part of the
recently-introduced Sonus Certified Consumer Voice over
Broadband (c-VoBB) solution. Sonus also announced a new
partner relationship with Atreus Systems to deliver hosted
value-added consumer and business voice services, including
Hosted PBX, business trunking (Integrated Access),
conferencing, and voice VPN services. Further, the Company
announced that it successfully completed interoperability
testing between Sonus' VoBB platform and NETGEAR's line of
broadband phone adapters, streamlining next-generation
customer access services.
"The impact of IP-based voice technologies has
largely taken place behind the scenes, offering immense
value to service providers, but remaining relatively
transparent to consumers," continued Ahmed. "But
in the coming years, the entire communications paradigm will
change as a result of IP-based technologies. Consumers will
experience a new level of richness in their communications
experience with customizable applications and services that
integrate both voice and data. This is a very exciting time
in the history of voice communications, and as both wireless
and wireline service providers continue to embrace
next-generation voice solutions, Sonus is poised to
capitalize on the market's evolution to a smarter, more
robust voice network."
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 Chelmsford,
Massachusetts. Additional information on Sonus is
available at http://www.sonusnet.com.
This release may contain 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' Annual Report on Form 10-K dated March 14, 2006 and
Quarterly Report on Form 10-Q dated May 8, 2006, both filed
with the SEC, which identify 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; 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.
In addition to Sonus' financial results which have been
prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP), this
release includes certain non-GAAP financial results to
assist investors and analysts in assessing our periodic
operating results. The non-GAAP financial results exclude
non-cash stock-based compensation expense. Non-GAAP
financial results are not a substitute for GAAP results.
Sonus uses non-GAAP financial results internally as an
alternative means for assessing our results of operations.
By excluding a non-cash charge such as stock-based
compensation, Sonus can evaluate its operations excluding
this non-cash charge and can compare its results on a more
consistent basis to the results of other companies in the
industry and to its operations in prior quarters where it
did not include stock-based compensation expense under
FAS123-R in its GAAP results. For its internal budgeting
and planning, Sonus' management uses financial statements
that do not include employee stock-based compensation.
Sonus' management also uses the foregoing non-GAAP results,
in addition to the corresponding GAAP results, in
determining objectives for compensation and bonus programs
or reviewing the financial performance of Sonus.
Non-GAAP financial results that exclude stock-based
compensation expense also provide useful information to
investors and analysts to more readily compare the
Company's operations to prior financial results and to the
financial results of other companies in the industry who
similarly exclude stock-based compensation expense in
non-GAAP results to investors and analysts. Because we
have historically reported results that exclude stock-based
compensation under FAS123-R to the investment community, we
believe the inclusion of non-GAAP numbers provides
consistency in our financial reporting.
We intend to continue to assess the potential value of
reporting non-GAAP results consistent with applicable rules
and regulations.
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Three
Months Three Months
Ended
Ended Ended
March 31,
December 31, March 31,
2006
2005 2005
Revenues :
Product $44,383
$41,908 $22,458
Service 15,589
15,342 11,152
Total revenues 59,972
57,250 33,610
Cost of revenues:
Product 15,853
13,965 6,843
Service 7,381
6,905 5,269
Total cost of revenues 23,234
20,870 12,112
Gross profit 36,738
36,380 21,498
Gross profit %:
Product 64.3%
66.7% 69.5%
Service 52.7%
55.0% 52.8%
Total gross profit 61.3%
63.5% 64.0%
Operating expenses:
Research and development 12,891
12,483 11,017
Sales and marketing 13,898
12,886 9,027
General and administrative 6,719
8,116 6,800
Total operating expenses 33,508
33,485 26,844
Income (loss) from operations 3,230
2,895 (5,346)
Interest expense (137)
(121) (128)
Interest income 3,442
3,092 1,875
Income (loss) before provision for
income taxes 6,535
5,866 (3,599)
Provision for income taxes 791
844 96
Net income (loss) $5,744
$5,022 $(3,695)
Net income (loss) per share:
Basic $0.02
$0.02 $(0.01)
Diluted $0.02
$0.02 $(0.01)
Weighted average shares outstanding:
Basic 250,064
249,390 247,877
Diluted 254,459
252,356 247,877
SONUS NETWORKS, INC.
Non- GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three months
ended March 31, 2006
Adjustments As
As Reported
(1) Adjusted
Revenues :
Product $44,383
$- $44,383
Service 15,589
- 15,589
Total revenues 59,972
- 59,972
Cost of revenues:
Product 15,853
(3) 15,850
Service 7,381
(252) 7,129
Total cost of revenues 23,234
(255) 22,979
Gross profit 36,738
255 36,993
Gross profit %:
Product 64.3%
64.3%
Service 52.7%
54.3%
Total gross profit 61.3%
61.7%
Operating expenses:
Research and development 12,891
(610) 12,281
Sales and marketing 13,898
(405) 13,493
General and administrative 6,719
(633) 6,086
Total operating expenses 33,508
(1,648) 31,860
Income from operations 3,230
1,903 5,133
Interest expense (137)
- (137)
Interest income 3,442
- 3,442
Income before provision for income taxes 6,535
1,903 8,438
Provision for income taxes 791
- 791
Net income $5,744
$1,903 $7,647
Net income per share:
Basic $0.02
$0.03
Diluted $0.02
$0.03
Weighted average shares outstanding:
Basic 250,064
250,064
Diluted 254,459
254,459
(1) Non-GAAP adjustments represent recorded stock-based
compensation
expense.
SONUS NETWORKS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 31,
December 31,
2006
2005
Assets
Current assets:
Cash and cash equivalents $50,309
$155,679
Marketable debt securities 239,312
140,569
Accounts receivable, net 33,272
72,321
Inventory, net 37,169
37,831
Other current assets 15,197
15,833
Deferred income taxes 519
519
Total current assets 375,778
422,752
Property and equipment, net 15,315
15,181
Long-term investments 50,616
17,993
Other assets 1,878
631
$443,587
$456,557
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $16,370
$20,408
Accrued expenses 19,384
23,204
Accrued restructuring expenses 198
195
Current portion of deferred revenue 73,209
88,199
Current portion of long-term liabilities 49
48
Convertible subordinated note 10,000
10,000
Total current liabilities 119,210
142,054
Long-term deferred revenue, less current
portion 28,990
33,853
Long-term liabilities, less current portion 422
485
Total liabilities 148,622
176,392
Commitments and contingencies
Stockholders' equity:
Common stock 254
252
Capital in excess of par value 1,064,989
1,055,941
Accumulated deficit (769,973)
(775,717)
Accumulated other comprehensive loss (38)
(44)
Treasury stock (267)
(267)
Total stockholders' equity 294,965
280,165
$443,587
$456,557
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three
Months Three Months
Ended
Ended
March
31, March 31,
2006
2005
Cash flows from operating activities:
Net income (loss) $5,744
$(3,695)
Adjustments to reconcile net income
(loss) to cash flows provided by (used in)
operating activities:
Depreciation and amortization of
property and equipment 2,293
1,476
Stock-based compensation 1,903
-
Loss of disposal of property and equipment 6
-
Changes in current assets and liabilities
Accounts receivable 39,071
4,855
Inventory 713
(2,910)
Other current assets
(857) (762)
Accounts payable
(4,072) 1,334
Accrued expenses and accrued restructuring
expenses
(3,926) (1,330)
Deferred revenue
(19,920) 948
Cash flows provided by (used in)
operating activities 20,955
(84)
Cash flows from investing activities:
Purchases of property and equipment
(2,328) (4,303)
(Purchases) maturities of marketable
debt securities, net
(131,366) 2,977
Decrease in restricted cash 250
-
Other assets 85
(81)
Net cash used in investing activities
(133,359) (1,407)
Cash flows from financing activities:
Sales of common stock in connection
with employee stock purchase plan 2,311
2,313
Proceeds from exercise of stock options 4,821
420
Payments of long-term liabilities
(12) (58)
Net cash provided by financing activities 7,120
2,675
Effect of exchange rate changes on
cash and cash equivalents
(86) -
Net (decrease) increase in cash and
cash equivalents
(105,370) 1,184
Cash and cash equivalents, beginning
of period 155,679
121,931
Cash and cash equivalents, end of period $50,309
$123,115
For more information, please contact:
Investor Relations:
Jocelyn Philbrook
Tel: +1-978-614-8672
Email: jphilbrook@sonusnet.com
Media Relations:
Sarah McAuley
Tel: +1-212-699-1836
Email: smcauley@sonusnet.com
SOURCE Sonus Networks, Inc.
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