Jon Wilson, Chief Financial Officer
Brett L. Perry, Shelton Group
RADISYS REPORTS FIRST QUARTER 2018 RESULTS
Better than Expected First Quarter Results; On Track to Achieve Non-GAAP Profitability in Second Half of 2018
HILLSBORO, OR - May 1, 2018 - Radisys Corporation (NASDAQ: RSYS), a global leader of open telecom solutions, today announced financial results for the first quarter ended March 31, 2018.
First Quarter Summary
- Consolidated revenue of $26.2 million, with Software-Systems revenue growth of 10% over prior year;
- GAAP gross margin of 26.6% and non-GAAP gross margin of 32.8%;
- GAAP loss per share of ($0.16) and non-GAAP loss per share of ($0.08), at the favorable-end of the Company’s guidance range;
- Delivered orders totaling over $1 million in software revenue to a top MediaEngine channel partner tied to accelerating end-customer voice-over-LTE deployments;
- Awarded orders totaling nearly $4 million for CORD services programs with an existing European Tier 1 customer and a new customer in India, both of which are expected to be delivered in 2018; and
- Closed a previously announced $17 million senior note financing in January.
“First quarter revenue and EPS both met or exceeded the high-end of our expectations given strong execution across the business,” said Brian Bronson, Radisys President and Chief Executive Officer. “Importantly, we are driving increased conversion of our pipeline within Software-Systems, having secured multiple wins in the first quarter through both direct sales and channel partners. This included a significant award from a European Tier 1 service provider as well as a new customer in India for development services tied to CORD initiatives. We also experienced ongoing strength in software deployments of MediaEngine with our largest channel partner via multiple new end-customer awards.
“In addition to our growing pipeline and improving customer conversion rate, we made fundamental progress toward transforming our cost structure and balance sheet. Importantly, our first quarter results do not yet fully reflect the significant enhancements to the business that we have made. Closing our new financing arrangements has enabled us to realign our operating model and reduce anticipated second quarter expenses by over 30% as compared to the third quarter of 2017. Coupled with increased revenue growth in our Software-Systems business, which will drive gross margin expansion over time, we remain on track to deliver quarterly non-GAAP profitability in the second half of 2018.”
For the first quarter of 2018, Software-Systems revenue was $11.1 million, compared to $14.8 million in the prior quarter and $10.1 million in the first quarter of 2017.
Gross margin was 49.2%, compared to 53.9% in the prior quarter and 53.8% in the first quarter of 2017. Operating loss was $3.1 million, compared to operating income of $0.6 million in the prior quarter and an operating loss of $3.3 million in the first quarter of 2017.
Hardware Solutions Results
For the first quarter of 2018, Hardware Solutions revenue was $15.0 million, compared to $17.5 million in the prior quarter and $27.5 million in the first quarter of 2017. Revenue in the first quarter of 2018 included approximately $5 million associated with previously anticipated legacy customer last-time builds.
Gross margin was 20.7%, compared to (26.7)% in the prior quarter and 17.4% in the first quarter of 2017. Operating income was $1.0 million, compared to an operating loss of $9.6 million in the prior quarter and an operating loss of $1.3 million in the first quarter of 2017.
For the first quarter of 2018, consolidated revenue was $26.2 million, compared to $32.3 million in the prior quarter and $37.6 million in the first quarter of 2017.
On a GAAP basis, gross margin in the first quarter of 2018 was 26.6%, compared to 4.2% in the prior quarter and 21.9% in the first quarter of 2017. First quarter 2018 GAAP research and development and selling, general, and administrative expenses were $11.0 million, compared to $12.7 million in the prior quarter and $15.9 million in the first quarter of 2017. The decline in operating expenses over the comparable periods was primarily the result of previously announced restructuring actions associated with the Company’s Hardware Solutions business.
On a non-GAAP basis, first quarter 2018 gross margin was 32.8%, compared to 40.4% in the prior quarter and 27.2% in the first quarter of 2017. First quarter 2018 research and development and selling, general and administrative expenses on a non-GAAP basis were $10.7 million, compared to $12.3 million in the prior quarter and $14.8 million in the first quarter of 2017.
For the first quarter of 2018, the Company recorded a GAAP net loss of $6.4 million, or ($0.16) per share, compared to a GAAP net loss of $19.6 million, or ($0.50) per share, in the prior quarter and a GAAP net loss of $10.0 million, or ($0.26) per share, in the first quarter of 2017. On a non-GAAP basis, the Company recorded a net loss of $3.3 million, or ($0.08) per share, in the first quarter of 2018, compared to a net loss of $0.3 million, or ($0.01) per share, in the prior quarter and a net loss of $5.5 million, or ($0.14) per diluted share, in the first quarter of 2017.
Second Quarter 2018 Financial Guidance
- Revenue is expected to be between $20 and $22 million. Note the first quarter of 2018 included approximately $5 million associated with legacy customer last-time build revenue recognized in the first quarter.
- GAAP gross margin is expected to approximate 29%. Non-GAAP gross margin is expected to be between 37% and 41% of sales.
- GAAP R&D and SG&A expenses are expected to approximate $9.5 million. Non-GAAP R&D and SG&A expenses are expected to approximate $9 million.
- GAAP loss is expected to range from ($0.18) to ($0.12) per share. Non-GAAP loss is expected to range from ($0.08) to ($0.02) per share. Both GAAP and non-GAAP loss per share are based on a projected 40 million shares outstanding.
Conference Call and Webcast Information
The Company will host a conference call to discuss first quarter 2018 results on May 1, 2018, at 5:00 p.m. ET. To participate in the live conference call, dial 888-333-0027 in the U.S. and Canada or 706-634-4990 for all other countries and reference conference ID # 4996908. The live conference call will also be available via webcast on the Radisys investor relations website at http://investor.radisys.com/.
A replay of the conference call will be available two hours after the call is complete until 11:59 p.m. on May 15, 2018. To access the replay, dial 855-859-2056 or 404-537-3406 and reference conference ID# 4996908. A replay of the webcast will be available for an extended period of time on the Radisys investor relations website at http://investor.radisys.com/.
Radisys (NASDAQ: RSYS), a global leader in open telecom solutions, enables service providers to drive disruption with new open architecture business models. Radisys’ innovative disaggregated and virtualized enabling technology solutions leverage open reference architectures and standards, combined with open software and hardware to power business transformation for the telecom industry, while its world-class services organization delivers systems integration expertise necessary to solve communications and content providers’ complex deployment challenges. For more information, visit www.Radisys.com.
This press release contains forward-looking statements, including statements about the Company's business, financial outlook and expectations for the second quarter of 2018. Actual results could differ materially from the outlook guidance and expectations in these forward-looking statements as a result of a number of risk factors which are outlined in the Company’s most recent Form 10-K and Form 10-Q filings with the Securities and Exchange Commission (SEC), copies of which may be obtained by contacting the Company at 503-615-1100, from the Company's investor relations web site at http://investor.radisys.com/, or at the SEC's website at http://www.sec.gov. Although forward-looking statements help provide additional information about Radisys, investors should keep in mind that forward-looking statements are inherently less reliable than historical information. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. The Company believes its expectations and assumptions are reasonable, but there can be no assurance that the expectations reflected herein will be achieved. All information in this press release is as of the date of this release. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
Non-GAAP Financial Measures
To supplement its consolidated financial statements in accordance with generally accepted accounting principles (GAAP), the Company's earnings release contains non-GAAP financial measures that exclude certain expenses, gains and losses, such as the effects of (a) amortization of acquired intangible assets, (b) stock-based compensation expense, (c) restructuring and other charges (reversals), net, (d) non-cash income tax expense, (e) restructuring inventory adjustment, (f) amortization of financing activities expenses, and (g) change in fair value of warrants. The Company believes that the use of non-GAAP financial measures provides useful information to investors to gain an overall understanding of its current financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that the Company believes are not indicative of its core operating results. In addition, non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring the Company's performance, and the Company believes that it is providing investors with financial measures that most closely align to its internal measurement processes. These non-GAAP measures are considered to be reflective of the Company's core operating results as they more closely reflect the essential revenue-generating activities of the Company and direct operating expenses (resulting in cash expenditures) needed to perform these revenue-generating activities. The Company also believes, based on feedback provided to the Company during its earnings calls' Q&A sessions and discussions with the investment community, that the non-GAAP financial measures it provides are necessary to allow the investment community to construct their valuation models to better align its results and projections with its competitors and market sector, as there is significant variability and unpredictability across companies with respect to certain expenses, gains and losses.
The non-GAAP financial information is presented using a consistent methodology from quarter-to-quarter and year-to-year. These measures should be considered in addition to results prepared in accordance with GAAP. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP financial measures.
A reconciliation of non-GAAP information to GAAP information is included in the tables below. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and reconciliations between GAAP and non-GAAP financial measures included in this earnings release should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
Radisys® is a registered trademark of Radisys