Consolidated revenue grows 24% year-on-year to
$55.4 million
Radisys Corporation (NASDAQ: RSYS), the services acceleration
company, today announced financial results for the third quarter
ended September 30, 2016.
Third Quarter Highlights
- Consolidated revenue of $55.4 million
resulted in 24% year-on-year revenue growth;
- GAAP loss per share was $0.07, with
non-GAAP earnings of $0.07 per diluted share;
- Secured and fulfilled follow-on
DCEngine orders of nearly $20 million from a Tier 1 U.S. service
provider;
- Awarded next-generation MediaEngine
deployment by a Tier 1 U.S. service provider; and
- Secured first professional services
proof of concept through CORD from a Tier 1 European service
provider.
“Third quarter revenue exceeded the top end of our guidance
range, due in part to a partial pull-in of DCEngine orders from our
largest Tier 1 U.S. customer that we previously expected to deliver
in the fourth quarter,” said Brian Bronson, Radisys President and
Chief Executive Officer. “Earnings were also better than expected
in the quarter, resulting in non-GAAP earnings per share of $0.21
for the first nine months of 2016, which is equivalent to our full
year EPS in 2015.
“Strategically, the ongoing traction with our Tier 1 U.S.
customer over the last few quarters for both DCEngine and
FlowEngine, combined with the recently expanded activity across
multiple product lines at our large customer in Asia, are powerful
testaments to our ability to introduce and implement highly
disruptive solutions for leading service providers. Our execution
in support of commercial deployments by these service providers has
meaningfully elevated awareness of Radisys at multiple Tier 1
service providers that are now either actively evaluating in labs
or conducting trials of our DCEngine and FlowEngine products.
During the quarter, we also advanced sales activity for our
MediaEngine product line by securing a long-term strategic win in
support of next-generation NFV conferencing deployments, which we
expect initial bookings from in the first half of 2017.
“As we’ve indicated in previous quarters, Radisys is positioned
as a leading provider for CORD (Central Office Re-architected as a
Datacenter) integration solutions, and during the third quarter we
secured our first proof of concept at a Tier 1 European service
provider. This initial proof of concept, along with the rapidly
growing funnel of similar potential engagements through CORD, are
individual programs that begin with Radisys providing solutions
expertise in the form of professional services and we believe each
represents a significant opportunity to pull-through sales of our
products as well as increased services business over time.
“In closing, at the midpoint of our fourth quarter guidance, we
will deliver on our full year revenue and EPS guidance, while
having simultaneously accelerated investment in our business to
successfully deliver on several sizable opportunities. Looking
beyond 2016, we are acutely focused on increasing our preparedness
to convert the growing number of engagements we have with Tier 1
service providers into actionable commercial orders. Although the
path to realizing our larger vision will not always be a straight
line, I strongly believe the compelling value proposition of
Radisys’ disruptive products and services have us well positioned
to capture meaningful long-term growth.”
Software-Systems Results
For the third quarter of 2016, Software-Systems revenue was
$10.4 million, compared to $14.6 million in the prior quarter and
$15.5 million in the third quarter of 2015. The year-on-year
decline was the result of large prior year orders for MediaEngine
product from an Asian service provider deploying its greenfield LTE
network.
Gross margins were 59.6%, compared to 62.8% in the prior quarter
and 58.7% in the third quarter of 2015. The sequential decline was
the result of unfavorable product mix while the year-on-year
improvement was the result of favorable product mix, partially
offset by lower absorption of fixed costs on a smaller revenue
base.
Operating loss was $2.2 million, compared to breakeven in the
prior quarter and income of $0.7 million in the third quarter of
2015. The current quarter operating results reflect a reduction in
revenue due to the timing of shipments to an Asian service provider
as well as increased hiring in support of new product feature
development and an expanded sales footprint.
Embedded Products Results
For the third quarter of 2016, Embedded Products revenue was
$45.0 million, compared to $46.7 million in the prior quarter and
$29.3 million in the third quarter of 2015. The year-on-year
increase reflects the shipment of follow-on DCEngine orders and
growth with existing Embedded customers, offset by expected
declines with non-strategic legacy customers.
Gross margins were 22.4%, compared to 17.8% in the prior quarter
and 20.4% in the third quarter of 2015. The sequential increase
reflects the benefit of operational efficiencies related to
follow-on DCEngine orders and coupled with favorable product mix
within core Embedded accounts. The year-on-year increase was the
result of improved overhead absorption on higher revenue and
favorable product mix within core Embedded accounts.
Operating income was $4.9 million, compared to $3.7 million in
the prior quarter and $1.8 million in the third quarter of 2015.
The sequential improvement in operating income was the result of a
discrete focus on operational and supply chain synergies.
Consolidated Results
For the third quarter of 2016, consolidated revenue was $55.4
million, compared to $61.3 million in the prior quarter and $44.8
million in the third quarter of 2015. Consolidated revenue growth
of 24% year-over-year was the result of continued DCEngine traction
and offset by the timing of MediaEngine deployments by a large
Asian service provider.
On a GAAP basis, gross margin in the third quarter of 2016 was
25.7%, compared to 25.2% in the prior quarter and 29.0% in the
third quarter of 2015. Third quarter 2016 GAAP research and
development and selling, general, and administrative expenses were
$14.4 million, compared to $14.9 million in the prior quarter and
$13.6 million in the third quarter of 2015. The increase in
operating expense year-on-year primarily reflects accelerated
hiring in support of the Company’s strategic growth
initiatives.
On a non-GAAP basis, third quarter 2016 gross margin was 29.4%,
compared to 28.6% in the prior quarter and 33.6% in the third
quarter of 2015. Third quarter 2016 research and development and
selling, general and administrative expenses on a non-GAAP basis
were $13.6 million, compared to $13.8 million in the prior quarter
and $12.5 million in the third quarter of 2015.
For the third quarter of 2016, the Company recorded a GAAP net
loss of $2.6 million, or $0.07 per share, compared to a GAAP net
loss of $0.6 million, or $0.02 per share, in the prior quarter and
GAAP net loss of $2.1 million, or $0.06 per share, in the third
quarter of 2015. On a non-GAAP basis, the Company recorded net
income of $2.6 million, or $0.07 per diluted share, compared to a
net income of $3.7 million, or $0.10 per diluted share, in the
prior quarter and net income of $2.6 million, or $0.07 per diluted
share, in the third quarter of 2015.
Fourth Quarter 2016 Financial Guidance
- Revenue is expected between $40 million
to $44 million.
- GAAP gross margin is expected to
approximate 29% at the midpoint and GAAP R&D and SG&A
expenses are expected to be approximately $16 million. Non-GAAP
gross margin is expected between 38% to 40% of sales and total
non-GAAP R&D and SG&A expenses are expected to approximate
$15 million.
- GAAP loss is expected to range from a
loss of $0.10 to $0.06 per share. Non-GAAP earnings are expected to
range from $0.02 to $0.06 per diluted share.
Conference Call and Webcast Information
The Company will host a conference call to discuss third quarter
2016 results on October 25, 2016, 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 # 66185026. 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 November 8, 2016. To
access the replay, dial 855-859-2056 or 404-537-3406 and reference
conference ID# 66185026. 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/.
About Radisys
Radisys (NASDAQ: RSYS) helps communications and content
providers, and their strategic partners, create new revenue streams
and drive cost out of their services delivery infrastructure.
Radisys’ hyperscale software defined infrastructure, service aware
traffic distribution platforms, real-time media processing engines
and wireless access technologies enable its customers to maximize,
virtualize and monetize their networks.
Forward-Looking Statements
This press release contains forward-looking statements,
including statements about the Company's business strategy, changes
in reporting segments financial outlook and expectations for the
fourth quarter of 2016, and statements related to revenue and gross
margins from our respective segments and product lines, investments
in future growth, expense savings or reductions, increased
profitability, product line focus, operational and administrative
efficiencies, revenue growth, margin improvement, financial
performance and other attributes of the Company. These
forward-looking statements are based on the Company's expectations
and assumptions, as of the date such statements are made, regarding
the Company's future operating performance and financial condition,
customer requirements, outcome of product trials, the economy and
other future events or circumstances. 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,
including, among others, (a) increased Tier 1 commercial
deployments across multiple product lines, (b) continued
implementation of the Company’s next-generation datacenter product,
(c) customer implementation of traffic management solutions, (d)
the outcome of product trials, (e) the market success of customers'
products and solutions, (f) the development and transition of new
products and solutions, (g) the enhancement of existing products
and solutions to meet customer needs and respond to emerging
technological trends, (h) the Company’s ability to raise additional
growth capital, (i) the Company's dependence on certain customers
and high degree of customer concentration, (j) the Company's use of
one contract manufacturer for a significant portion of the
production of its products, including the success of transitioning
contract manufacturing partners, (k) matters affecting the software
and embedded product industry, including changes in industry
standards, changes in customer requirements and new product
introductions, (l) actions by regulatory authorities or other third
parties, (m) cash generation, (n) changes in tariff and trade
policies and other risks associated with foreign operations, (o)
fluctuations in currency exchange rates, (p) the ability of the
Company to successfully complete any restructuring, acquisition or
divestiture activities, (q) risks relating to fluctuations in the
Company's operating results, the uncertainty of revenues and
profitability and the potential need to raise additional funding
and (r) other factors listed in the Company's reports filed with
the Securities and Exchange Commission (SEC), including those
listed under “Risk Factors” in Radisys' Annual Report on Form 10-K
for the year ended December 31, 2015, 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 October 25, 2016. 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 and (e)
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
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share
amounts, unaudited) Three Months Ended Nine
Months Ended September 30, September 30,
2016 2015 2016
2015 Revenues $ 55,397 $ 44,780 $ 171,831 $ 140,516 Cost of
sales: Cost of sales 39,225 29,812 123,576 96,347 Amortization of
purchased technology 1,926 1,961
5,780 5,935 Gross margin 14,246 13,007 42,475
38,234 Operating expenses: Research and development 6,093 6,054
18,044 19,618 Selling, general and administrative 8,321 7,561
24,514 22,536 Intangible assets amortization 1,260 1,260 3,780
3,780 Restructuring and other charges, net 655
148 1,602 4,842 Loss from
operations (2,083 ) (2,016 ) (5,465 ) (12,542 ) Interest expense
(116 ) (97 ) (392 ) (417 ) Other income, net 255
568 1,463 1,126 Loss
before income tax expense (1,944 ) (1,545 ) (4,394 ) (11,833 )
Income tax expense 694 521 1,800
1,405 Net loss $ (2,638 ) $ (2,066 ) $ (6,194
) $ (13,238 ) Net loss per share: Basic $ (0.07 ) $ (0.06 )
$ (0.17 ) $ (0.36 ) Diluted $ (0.07 ) $ (0.06 ) $ (0.17 ) $ (0.36 )
Weighted average shares outstanding Basic 38,056
36,830 37,402 36,740
Diluted 38,056 36,830 37,402
36,740
CONDENSED CONSOLIDATED BALANCE SHEETS (In
thousands, unaudited) September 30, 2016
December 31, 2015 ASSETS Current assets: Cash
and cash equivalents $ 27,479 $ 20,764 Accounts receivable, net
56,572 60,942 Inventories and deferred cost of sales, net 19,080
30,925 Other current assets 6,423 14,098
Total current assets 109,554 126,729 Property and equipment,
net 6,616 6,134 Intangible assets, net 20,762 30,322 Other assets,
net 4,368 3,884 Total assets $ 141,300
$ 167,069
LIABILITIES AND SHAREHOLDERS'
EQUITY Current liabilities: Accounts payable $ 32,391 $ 43,451
Deferred revenue 6,117 23,062 Other accrued liabilities 11,916
16,654 Line of credit 25,000 15,000
Total current liabilities 75,424 98,167 Other long-term liabilities
5,540 2,985 Total liabilities
80,964 101,152 Shareholders' equity: Common
stock 338,590 338,165 Accumulated deficit (277,543 ) (271,349 )
Accumulated other comprehensive income (711 ) (899 )
Total shareholders’ equity 60,336 65,917
Total liabilities and shareholders’ equity $ 141,300
$ 167,069
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (In thousands, unaudited)
Three Months Ended Nine
Months Ended September 30, September 30,
2016 2015 2016
2015 Cash flows from operating activities: Net loss $
(2,638 ) $ (2,066 ) $ (6,194 ) $ (13,238 ) Adjustments to reconcile
net loss to net cash provided by operating activities: Depreciation
and amortization 4,182 4,582 12,775 14,056 Stock-based compensation
expense 987 1,172 2,867 2,971 Other 2,201 947 2,401 2,684 Changes
in operating assets and liabilities: Accounts receivable (13,572 )
(4,932 ) 4,357 (25 ) Inventories and deferred cost of sales 2,657
(1,631 ) 7,760 1,745 Other receivables 656 367 7,663 2,874 Accounts
payable 7,439 1,679 (11,265 ) (5,910 ) Deferred revenue 2,621 782
(14,738 ) 1,148 Other operating assets and liabilities
(2,516 ) (412 ) (2,986 ) 797 Net cash
provided by operating activities 2,017 488
2,640 7,102
Cash flows from
investing activities: Capital expenditures (2,290 )
(607 ) (3,420 ) (1,653 ) Net cash used in
investing activities (2,290 ) (607 ) (3,420 )
(1,653 )
Cash flows from financing activities:
Borrowings on line of credit, net — — 10,000 — Repayment of
convertible senior notes — — — (18,000 ) Net settlement of
restricted shares (3,237 ) (5 ) (3,259 ) (102 ) Other financing
activities 37 83 538
250 Net cash provided by (used in) financing
activities (3,200 ) 78 7,279
(17,852 ) Effect of exchange rate changes on cash and cash
equivalents 26 (132 ) 216
(463 ) Net increase (decrease) in cash and cash equivalents (3,447
) (173 ) 6,715 (12,866 ) Cash and cash equivalents, beginning of
period 30,926 18,549 20,764
31,242 Cash and cash equivalents, end of
period $ 27,479 $ 18,376 $ 27,479 $ 18,376
REVENUES, GROSS MARGIN AND INCOME (LOSS)
FROM OPERATIONS BY OPERATING SEGMENT (In thousands,
unaudited) Three Months
Ended Nine Months Ended September 30,
September 30, 2016 2015
2016 2015 Revenue Software-Systems $
10,441 $ 15,477 $ 39,101 $ 39,336 Embedded Products and Hardware
Services 44,956 29,303 132,730
101,180 Total revenues $ 55,397 $
44,780 $ 171,831 $ 140,516
Three Months Ended Nine Months Ended September
30, September 30, 2016 2015 2016
2015 Gross margin Software-Systems $ 6,226 $ 9,081 $ 24,186
$ 22,354 Embedded Products and Hardware Services 10,070 5,973
24,370 22,043 Corporate and other (2,050 ) (2,047 )
(6,081 ) (6,163 ) Total gross margin $ 14,246
$ 13,007 $ 42,475 $ 38,234
Three Months Ended Nine Months Ended September
30, September 30, 2016 2015 2016
2015 Income (loss) from operations Software-Systems $ (2,201
) $ 743 $ (1,390 ) $ (3,126 ) Embedded Products and Hardware
Services 4,946 1,782 9,954 8,112 Corporate and other (4,828
) (4,541 ) (14,029 ) (17,528 ) Total loss from
operations $ (2,083 ) $ (2,016 ) $ (5,465 ) $ (12,542 )
REVENUES BY GEOGRAPHY
(In thousands, unaudited) Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 North America $ 34,541 62.4 % $ 18,539
41.4 % $ 116,698 67.9 % $ 58,470
41.6 % Asia Pacific 7,946 14.3 19,206 42.9 22,025 12.8
58,016 41.3 Europe, the Middle East and Africa 12,910
23.3 7,035 15.7
33,108 19.3 24,030 17.1
Total $ 55,397 100.0 % $ 44,780
100.0 % $ 171,831 100.0 % $ 140,516
100.0 %
RECONCILIATION
OF GAAP TO NON-GAAP FINANCIAL MEASURES AND AS A PERCENT OF
REVENUES (In thousands, except per share amounts,
unaudited) Three Months Ended Nine Months
Ended September 30, September 30,
2016 2015 2016
2015 GROSS MARGIN:
GAAP gross margin $ 14,246
25.7 % $ 13,007 29.0 % $ 42,475
24.7 % $ 38,234 27.2 % (a)
Amortization of acquired intangible assets 1,926 1,961 5,780 5,935
(b) Stock-based compensation 124
86 301
228 Non-GAAP gross
margin $ 16,296 29.4 % $ 15,054
33.6 % $ 48,556 28.3 % $ 44,397
31.6 %
RESEARCH AND DEVELOPMENT: GAAP
research and development $ 6,093 11.0 % $
6,054 13.5 % $ 18,044
10.5 % $ 19,618 14.0 % (b) Stock-based
compensation 238 252
676
641 Non-GAAP research and
development $ 5,855 10.6 % $ 5,802
13.0 % $ 17,368 10.1 % $ 18,977
13.5 %
SELLING, GENERAL AND
ADMINISTRATIVE: GAAP selling, general and administrative $
8,321 15.0 % $ 7,561 16.9
% $ 24,514 14.3 % $ 22,536
16.0 % (b) Stock-based compensation 625
834 1,890
2,102
Non-GAAP selling, general and administrative $ 7,696
13.9 % $ 6,727 15.0 % $ 22,624
13.2 % $ 20,434 14.5 %
INCOME (LOSS) FROM OPERATIONS: GAAP loss from
operations $ (2,083 ) (3.8 )% $ (2,016 )
(4.5 )% $ (5,465 ) (3.2 )% $ (12,542 )
(8.9 )% (a) Amortization of acquired intangible assets 3,186
3,221 9,560 9,715 (b) Stock-based compensation 987 1,172 2,867
2,971 (c) Restructuring and acquisition-related charges, net
655 148
1,602 4,842
Non-GAAP income from operations $ 2,745
5.0 % $ 2,525 5.6 % $ 8,564
5.0 % $ 4,986 3.5 %
NET INCOME (LOSS): GAAP net loss $ (2,638 )
(4.8 )% $ (2,066 ) (4.6 )% $ (6,194 )
(3.6 )% $ (13,238 ) (9.4 )% (a) Amortization
of acquired intangible assets 3,186 3,221 9,560 9,715 (b)
Stock-based compensation 987 1,172 2,867 2,971 (c) Restructuring
and acquisition-related charges, net 655 148 1,602 4,842 (d) Income
taxes 404 132 682 630 (e) Gain on the liquidation of foreign
subsidiaries $ — $ —
$ (421 ) $ —
Non-GAAP net income $ 2,594 4.7
% $ 2,607 5.8 % $ 8,096
4.7 % $ 4,920 3.5 % GAAP weighted
average diluted shares 38,056 36,830 37,402 36,740 Dilutive equity
awards included in non-GAAP earnings per share 1,313
167
1,164 156
Non-GAAP weighted average diluted shares 39,369
36,997
38,566 36,896
GAAP net loss per share (diluted) $
(0.07 ) $ (0.06 ) $ (0.17 ) $ (0.36 ) Non-GAAP adjustments detailed
above 0.14 0.13
0.38
0.49 Non-GAAP net income per share
(diluted) $ 0.07 $ 0.07
$ 0.21 $ 0.13
RECONCILIATION
OF GAAP TO NON-GAAP GUIDANCE NET INCOME (LOSS) PER SHARE
(In millions, except per share amounts, unaudited)
Three Months Ended December 31, 2016 Low End
High End GAAP net loss (4.0 ) (2.5 ) (a)
Amortization of acquired intangible assets 3.2 3.2 (b) Stock-based
compensation 1.0 1.0 (c) Restructuring and acquisition-related
charges, net 0.4 0.5 (d) Income taxes 0.2 0.3
Total adjustments
4.8 5.0
Non-GAAP net income
$ 0.8 $
2.5 GAAP weighted average shares 38,500 38,500
Non-GAAP adjustments 1,000 2,000
Non-GAAP weighted average shares (diluted)
39,500
40,500 GAAP net loss per share
(0.10 ) (0.06 ) Non-GAAP adjustments detailed above 0.12
0.12 Non-GAAP net income per share (diluted)
$ 0.02 $ 0.06
RECONCILIATION OF GAAP TO NON-GAAP
GUIDANCE GROSS MARGIN (unaudited)
Estimates at themidpoint of
theguidance range
Three Months Ended December 31, 2016 GAAP
29.0
% (a) Amortization of acquired intangible assets 3.8 (b)
Stock-based compensation 6.2 Non-GAAP
39.0 %
RECONCILIATION OF GAAP TO NON-GAAP
GUIDANCE RESEARCH AND DEVELOPMENT EXPENSE AND
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE (In millions,
unaudited)
Estimates at themidpoint of
theguidance range
Three Months Ended December 31, 2016 GAAP
$
16.0 (b) Stock-based compensation 1.0 Non-GAAP
$ 15.0
Non-GAAP financial measures includes the performance of
Software-Systems and Embedded Products and Hardware Services.
The Company excludes the following corporate and other expenses,
reversals, gains and losses from its non-GAAP financial measures,
when applicable:
(a) Amortization of acquired intangible assets:
Amortization of acquisition-related intangible assets primarily
relate to core and existing technologies, trade name and customer
relationships that were acquired with the acquisitions of
Continuous Computing and Pactolus. The Company excludes the
amortization of acquisition-related intangible assets because it
does not reflect the Company's ongoing business and it does not
have a direct correlation to the operation of the Company's
business. In addition, in accordance with GAAP, the Company
generally recognizes expenses for internally-developed intangible
assets as they are incurred, notwithstanding the potential future
benefit such assets may provide. Unlike internally-developed
intangible assets, however, and also in accordance with GAAP, the
Company generally capitalizes the cost of acquired intangible
assets and recognizes that cost as an expense over the useful lives
of the assets acquired. As a result of their GAAP treatment, there
is an inherent lack of comparability between the financial
performance of internally-developed intangible assets and acquired
intangible assets. Accordingly, the Company believes it is useful
to provide, as a supplement to its GAAP operating results, non-GAAP
financial measures that exclude the amortization of acquired
intangibles in order to enhance the period-over-period comparison
of its operating results, as there is significant variability and
unpredictability across companies with respect to this expense.
(b) Stock-based compensation: Stock-based compensation
consists of expenses recorded under GAAP, in connection with stock
awards such as stock options, restricted stock awards and
restricted stock units granted under the Company's equity incentive
plans and shares issued pursuant to the Company's employee stock
purchase plan. The Company excludes stock-based compensation from
non-GAAP financial measures because it is a non-cash measurement
that does not reflect the Company's ongoing business and because
the Company believes that investors want to understand the impact
on the Company of the adoption of the applicable GAAP surrounding
share based payments; the Company believes that the provision of
non-GAAP information that excludes stock-based compensation
improves the ability of investors to compare its period-over-period
operating results, as there is significant variability and
unpredictability across companies with respect to this expense.
(c) Restructuring and other charges, net: Restructuring
and other charges, net relates to costs associated with
non-recurring events. These include costs incurred for employee
severance, acquisition or divestiture activities, excess facility
costs, certain legal costs, asset related charges and other
expenses associated with business restructuring activities.
Restructuring and other charges are excluded from non-GAAP
financial measures because they are not considered core operating
activities. Although the Company has engaged in various
restructuring activities over the past several years, each has been
a discrete event based on a unique set of business objectives. The
Company does not engage in restructuring activities in the ordinary
course of business. As such, the Company believes it is appropriate
to exclude restructuring charges from its non-GAAP financial
measures because it enhances the ability of investors to compare
the Company's period-over-period operating results.
(d) Income taxes: Non-GAAP income tax expense is equal to
the Company's projected cash tax expense. Adjustments to GAAP
income tax expense are required to eliminate the recognition of tax
expense from profitable entities where we utilize deferred tax
assets to offset current period tax liabilities. We believe that
providing this non-GAAP figure is useful to our investors as it
more closely represents the true economic impact of our tax
positions.
(e) Gain on the liquidation of foreign subsidiaries: On a
non-recurring basis we have recorded a gain or loss to reflect the
realization of accumulated foreign currency translation adjustments
upon the liquidation of certain international subsidiaries. This
gain or loss represents the net unrealized foreign currency
translation gains or losses accumulated from changes in exchange
rates and the related effects from the translation of assets and
liabilities of these entities. The liquidation of foreign
subsidiaries occurs on an infrequent basis and management does not
view the impact of this non-cash charge as indicative of the
ongoing performance of the Company. As such, the Company believes
it is appropriate to exclude this gain from its non-GAAP financial
measures because it enhances the ability of investors to compare
the Company's period-over-period operating results.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161025006615/en/
Company ContactRadisys CorporationJonathan Wilson,
503-615-1685Chief Financial
Officerjon.wilson@radisys.comorInvestor ContactShelton
GroupBrett L. Perry, 214-272-0070bperry@sheltongroup.com
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