HILLSBORO, OR - November 8, 2018 - Radisys Corporation (NASDAQ: RSYS), a global leader of open telecom solutions, today announced financial results for the third quarter ended September 30, 2018.
Third Quarter Summary
- Consolidated revenue of $27.0 million, with Software-Systems revenue growth of 24% year-over-year;
- GAAP gross margin of 43.4% and non-GAAP gross margin of 43.6%;
- GAAP loss of ($0.05) per share and non-GAAP earnings of $0.05 per diluted share; and
- Exited the quarter with $14.1 million of consolidated cash, cash equivalents and restricted cash, an increase of $4.5 million over prior quarter.
“Our third quarter results reflect continued strength across our business, and although we incurred a net loss on a GAAP basis, we achieved a second consecutive quarter of non-GAAP profitability,” said Brian Bronson, Radisys President and Chief Executive Officer. “Our Software-Systems segment delivered another quarter of above 20% year-over-year revenue growth while demand for our Hardware Solutions products continues to exceed our near-term expectations.
“Additionally, we continue to work towards obtaining the final regulatory approvals required for closing our acquisition by Reliance before year-end. As we previously stated, 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 third quarter of 2018, Software-Systems revenue was $14.1 million, compared to $13.7 million in the prior quarter and $11.3 million in the third quarter of 2017.
Gross margin was 59.6%, compared to 64.6% in the prior quarter and 47.9% in the third quarter of 2017. Operating income was breakeven, compared to operating income of $0.9 million in the prior quarter and an operating loss of $2.4 million in the third quarter of 2017.
Hardware Solutions Results
For the third quarter of 2018, Hardware Solutions revenue was $12.9 million, compared to $10.7 million in the prior quarter and $17.5 million in the third quarter of 2017.
Gross margin was 26.2%, compared to 20.9% in the prior quarter and (13.2)% in the third quarter of 2017. Operating income was $1.8 million, compared to operating income of $0.8 million in the prior quarter and an operating loss of $7.9 million in the third quarter of 2017.
For the third quarter of 2018, consolidated revenue was $27.0 million, compared to $24.4 million in the prior quarter and $28.8 million in the third quarter of 2017.
On a GAAP basis, gross margin in the third quarter of 2018 was 43.4%, compared to 37.5% in the prior quarter and 4.2% in the third quarter of 2017. Third quarter 2018 research and development and selling, general, and administrative expenses on a GAAP basis were $10.2 million, compared to $9.7 million in the prior quarter and $13.5 million in the third quarter of 2017.
On a non-GAAP basis, third quarter 2018 gross margin was 43.6%, compared to 45.3% in the prior quarter and 10.8% in the third quarter of 2017. Third quarter 2018 research and development and selling, general and administrative expenses on a non-GAAP basis were $10.0 million, compared to $9.4 million in the prior quarter and $13.4 million in the third quarter of 2017.
For the third quarter of 2018, the Company recorded a GAAP net loss of $1.9 million, or ($0.05) per share, compared to a GAAP net loss of $4.6 million, or ($0.12) per share, in the prior quarter and a GAAP net loss of $15.4 million, or ($0.39) per share, in the third quarter of 2017. On a non-GAAP basis, the Company recorded net income of $2.0 million, or $0.05 per diluted share, in the third quarter of 2018, compared to net income of $2.2 million, or $0.06 per diluted share, in the prior quarter and a net loss of $11.0 million, or ($0.28) per share, in the third 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 is expected to close in the fourth quarter of 2018. Due to the pending acquisition, the Company will not be hosting a conference call or providing guidance on anticipated financial results for future periods.
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 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: 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.
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, net, (d) non-cash income tax expense, (e) restructuring inventory adjustment, (f) amortization of financing activities expenses, (g) change in fair value of warrants, and (h) loss (gain) on the liquidation of foreign subsidiaries. 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