HILLSBORO, OR - July 31, 2018 - Radisys Corporation (NASDAQ: RSYS), a global leader of open telecom solutions, today announced financial results for the second quarter ended June 30, 2018.
Second Quarter Summary
- Consolidated revenue of $24.4 million, with Software-Systems representing over 50% of total revenue including growth of nearly 20% over prior year;
- GAAP gross margin of 37.5% and non-GAAP gross margin of 45.3%;
- GAAP loss of ($0.12) per share and non-GAAP earnings of $0.06 per diluted share; and
- Entered into a definitive agreement on June 29 to be acquired by Reliance Industries Limited (“Reliance”) for $1.72 per share.
“Second quarter revenue and EPS exceeded the high-end of our expectations, including the achievement of non-GAAP profitability for the quarter,” said Brian Bronson, Radisys President and Chief Executive Officer. “Our second quarter results benefited from strength in our Software-Systems segment driven by early 5G licensing opportunities as well as upside residual demand from our legacy hardware business.
“Additionally, at the end of the second quarter we announced a definitive agreement for Radisys to be acquired by Reliance. While we will continue to work independently on driving our future growth and innovation, this transaction will help to accelerate our strategy and provide the scale required by our current and prospective customers to more fully embrace Radisys’ suite of products and services. Moreover, we expect the addition of Reliance’s visionary leadership and strong market position to further enhance our ability to develop and integrate large-scale, disruptive, open-centric end-to-end solutions.”
For the second quarter of 2018, Software-Systems revenue was $13.7 million, compared to $11.1 million in the prior quarter and $11.5 million in the second quarter of 2017.
Gross margin was 64.6%, compared to 49.2% in the prior quarter and 54.3% in the second quarter of 2017. Operating income was $0.9 million, compared to an operating loss of $3.1 million in the prior quarter and an operating loss of $1.9 million in the second quarter of 2017.
Hardware Solutions Results
For the second quarter of 2018, Hardware Solutions revenue was $10.7 million, compared to $15.0 million in the prior quarter and $23.6 million in the second quarter of 2017.
Gross margin was 20.9%, compared to 20.7% in the prior quarter and 24.3% in the second quarter of 2017. Operating income was $0.8 million, compared to operating income of $1.0 million in the prior quarter and operating income of $0.2 million in the second quarter of 2017.
For the second quarter of 2018, consolidated revenue was $24.4 million, compared to $26.2 million in the prior quarter and $35.1 million in the second quarter of 2017.
On a GAAP basis, gross margin in the second quarter of 2018 was 37.5%, compared to 26.6% in the prior quarter and 28.5% in the second quarter of 2017. Second quarter 2018 research and development and selling, general, and administrative expenses on a GAAP basis were $9.7 million, compared to $11.0 million in the prior quarter and $14.2 million in the second quarter of 2017.
On a non-GAAP basis, second quarter 2018 gross margin was 45.3%, compared to 32.8% in the prior quarter and 34.1% in the second quarter of 2017. Second quarter 2018 research and development and selling, general and administrative expenses on a non-GAAP basis were $9.4 million, compared to $10.7 million in the prior quarter and $13.7 million in the second quarter of 2017.
For the second quarter of 2018, the Company recorded a GAAP net loss of $4.6 million, or ($0.12) per share, compared to a GAAP net loss of $6.4 million, or ($0.16) per share, in the prior quarter and a GAAP net loss of $7.6 million, or ($0.19) per share, in the second quarter of 2017. On a non-GAAP basis, the Company recorded net income of $2.2 million, or $0.06 per diluted share, in the second quarter of 2018, compared to a net loss of $3.3 million, or ($0.08) per share, in the prior quarter and a net loss of $2.2 million, or ($0.06) per share, in the second quarter of 2017.
Proposed Acquisition of Radisys by Reliance
As previously announced on June 29, 2018, Radisys Corporation and Reliance Industries entered into a definitive agreement under which Reliance will acquire Radisys for US$1.72 per share in cash. The transaction is subject to certain customary closing conditions, including regulatory approvals and approval of Radisys’ shareholders, and is expected to close in the fourth quarter of 2018. Due to the pending acquisition, the Company will not be providing guidance on anticipated financial results for future periods.
Additional information on the proposed transaction can be found in the preliminary proxy statement filed by Radisys with the SEC on July 30, 2018.
Conference Call and Webcast Information
The Company will host a conference call to discuss second quarter 2018 results on July 31, 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 # 2686128. The live conference call will also be available via webcast on the Radisys investor relations website at http://www.radisys.com/investor-relations.
A replay of the conference call will be available two hours after the call is complete until 11:59 p.m. on August 14, 2018. To access the replay, dial 855-859-2056 or 404-537-3406 and reference conference ID# 2686128. A replay of the webcast will be available for an extended period of time on the Radisys investor relations website at http://www.radisys.com/investor-relations.
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.
Certain statements contained in this communication may constitute “forward-looking statements.” Forward-looking statements can usually be identified by the use of words such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “evolve,” “expect,” “forecast,” “intend,” “looking ahead,” “may,” “opinion,” “plan,” “possible,” “potential,” “project,” “should,” “will” and other expressions which indicate future events or trends. Such statements include statements as to the expected timing of completion of the merger, the expected benefits and costs of the transaction, management plans relating to the transaction and the satisfaction of all closing conditions to the transaction, including the ability to obtain shareholder and regulatory approvals.
These forward-looking statements are based upon certain expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those anticipated as a result of various factors, including the following: Radisys’ shareholders may not approve the transaction; conditions to the closing of the transaction, including receipt of required regulatory approvals, may not be satisfied timely, if at all; the transaction may involve unexpected costs, liabilities or delays; revenues following the transaction may be lower than expected; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected following the transaction; uncertainties surrounding the transaction; the outcome of any legal proceedings related to the transaction; Radisys may be adversely affected by other economic, business, and/or competitive factors; risks that the pending transaction disrupts current plans and operations; the retention of key employees of Radisys; other risks to consummation of the transaction, including circumstances that could give rise to the termination of the merger agreement and the risk that the transaction will not be consummated within the expected time period or at all; and the other risks described from time to time in Radisys’ reports filed with the Securities and Exchange Commission (the “SEC”) under the heading “Risk Factors,” including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, subsequent Quarterly Reports on Form 10-Q and in other of Radisys’ filings with the SEC.
All forward-looking statements are qualified by, and should be considered in conjunction with, such cautionary statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which such statements were made. Except as required by applicable law, Radisys undertakes no obligation to update forward-looking statements to reflect events or circumstances arising after such date.
Additional Information and Where to Find It
In connection with the transaction, Radisys intends to file relevant materials with the SEC, including a proxy statement on Schedule 14A. Following the filing of the definitive proxy statement with the SEC, Radisys will mail the definitive proxy statement and a proxy card to each shareholder entitled to vote at the special meeting relating to the transaction. BEFORE MAKING ANY VOTING DECISION, RADISYS SHAREHOLDERS ARE URGED TO CAREFULLY READ THESE MATERIALS (AND ANY AMENDMENTS OR SUPPLEMENTS) AND ANY OTHER RELEVANT DOCUMENTS THAT RADISYS FILES WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. The definitive proxy statement, the preliminary proxy statement and other relevant materials in connection with the transaction (when they become available), and any other documents filed by Radisys with the SEC, may be obtained free of charge at the SEC’s website (http://www.sec.gov), at Radisys’ investor website (http:// radisys.com/investor-relations), or by writing or calling Radisys at Radisys Corporation, 5435 NE Dawson Creek Drive Hillsboro, OR 97124 or by (503) 615-1685.
Participants in the Solicitation
Radisys and its directors and executive officers may be deemed to be participants in the solicitation of proxies from Radisys’ shareholders with respect to the transaction. Information about Radisys’ directors and executive officers and their ownership of Radisys’ common stock is set forth in Radisys’ Amendment No. 1 to Annual Report on Form 10-K/A filed with the SEC on April 26, 2018. To the extent that holdings of Radisys’ securities have changed since the amounts printed in Radisys’ Form 10-K/A, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. Additional information regarding the identity of the participants in the proxy solicitation, and their direct or indirect interests in the transaction, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with SEC in connection with the transaction.
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