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Sonus Networks Reports Third Quarter 2009 Financial Results

Posted on: Thursday, 5 November 2009, 15:05 CST

WESTFORD, Mass., Nov. 5 /PRNewswire-FirstCall/ -- Sonus Networks, Inc. (Nasdaq: SONS), providing network transformation through IP communications technology, today announced results for the third quarter ended September 30, 2009.

Revenue for the third quarter of fiscal 2009 was $56.2 million, compared to $61.6 million in the second quarter of fiscal 2009 and revenue from continuing operations of $62.2 million for the third quarter of fiscal 2008. The Company's net loss on a GAAP basis was $3.4 million, or $0.01 per share, for the third quarter of 2009, compared to net income of $4.4 million, or $0.02 per diluted share, for the second quarter of 2009, and a loss from continuing operations of $20.7 million, or $0.08 per share, for the third quarter of 2008. The Company ended the quarter with cash, cash equivalents, marketable securities and investments totaling $394.2 million.

"During the third quarter we completed our restructuring initiatives which started in the second half of 2008," said Richard Nottenburg, president and chief executive officer of Sonus Networks. "We continue to focus on investing in new products and service offerings bringing innovative solutions to the market."

Conference Call Details: Date: Monday, November 9, 2009. Time: 4:15 p.m. ET. To listen live via telephone: Dial-in number: 800-734-8583 International Callers: +1 212-231-2906

To listen via internet:

Sonus will host a live webcast of the conference call. To access the webcast, visit www.sonusnet.com, About Us, Investor Relations.

Replay:

A telephone playback of the call will be available following the conference and can be accessed by calling 800-633-8284 or for international callers, please call +1 402-977-9140. The reservation number for the replay is 21441087 and will be available until November 23, 2009.

A replay of the webcast will be also available on the Sonus Networks Investor Relations website. To access the replay of the webcast, visit www.sonusnet.com, About Us, Investor Relations, Webcast Archive.

About Sonus Networks

Sonus Networks, Inc., providing network transformation through IP communications technology, is leading the evolution of communications networks to support the multi-device demands of today's digital lifestyle. Sonus solutions and services enable fixed, mobile and cable operators to gain network awareness and new multi-media capabilities essential to retaining and expanding their subscriber base. Through standards-based interoperable solutions and services, Sonus extends the investments made in traditional networks by enabling operators to seamlessly migrate to next generation technology and deliver the secure, reliable, scalable and cost-effective network needed to grow their business. For more information visit 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. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009, June 30, 2009 and September 30, 2009. Risk factors include, among others: our ability to align our cost structure with market conditions, our internal control over financial reporting and our ability to report our financial results timely and accurately; the unpredictability of our quarterly financial results; risks and uncertainties associated with the Company's previous restatement of its historical stock option granting practices and accounting, including regulatory actions; actions that may be taken by significant shareholders; risks associated with the right-sizing and re-alignment of our business; and the impact the current global financial market conditions may have on the telecommunications industry. 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, except as required by law.

Sonus is a registered trademark of Sonus Networks, Inc. All other company and product names may be trademarks of the respective companies with which they are associated.

For more information, please contact: Lucy Millington Beth Panfil 978-614-8240 978-614-8034 lmillington@sonusnet.com bpanfil@sonusnet.com

SONUS NETWORKS, INC. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three months ended ------------------ September 30, June 30, September 30, 2009 2009 2008 ---- ---- ---- Revenue: Product $33,544 $36,320 $36,710 Service 22,621 25,287 25,474 ------ ------ ------ Total revenue 56,165 61,607 62,184 ------ ------ ------ Cost of revenue: Product 10,160 10,747 11,643 Service 10,755 10,568 11,524 ------ ------ ------ Total cost of revenue 20,915 21,315 23,167 ------ ------ ------ Gross profit 35,250 40,292 39,017 ------ ------ ------ Gross profit % Product 69.7% 70.4% 68.3% Service 52.5% 58.2% 54.8% Total gross profit % 62.8% 65.4% 62.7% Operating expenses: Research and development 14,141 15,501 18,240 Sales and marketing 11,527 12,344 17,520 General and administrative 11,578 10,186 21,631 Litigation settlements - - 19,100 Restructuring 1,533 (7) - ----- --- --- Total operating expenses 38,779 38,024 76,491 ------ ------ ------ Income (loss) from operations (3,529) 2,268 (37,474) Interest expense (23) 8 (204) Interest income 787 1,077 2,897 Other income, net 12 19 2 --- --- --- Income (loss) from continuing operations before income taxes (2,753) 3,372 (34,779) Income tax (provision) benefit (644) 1,011 14,096 ------ ------ ------ Income (loss) from continuing operations (3,397) 4,383 (20,683) Loss from discontinued operations, net of tax - - (563) ------ ------ ------ Net income (loss) $(3,397) $4,383 $(21,246) ======= ====== ======== Earnings (loss) per share: Basic Continuing operations $(0.01) $0.02 $(0.08) Discontinued operations - - - ------ ------ ------ $(0.01) $0.02 $(0.08) ====== ===== ====== Diluted Continuing operations $(0.01) $0.02 $(0.08) Discontinued operations - - - ------ ------ ------ $(0.01) $0.02 $(0.08) ====== ===== ====== Shares used to compute earnings (loss) per share: Basic 273,907 273,543 271,619 Diluted 273,907 273,768 271,619

SONUS NETWORKS, INC. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Nine months ended ----------------- September 30, September 30, 2009 2008 ------ ------ Revenue: Product $89,267 $149,745 Service 69,517 73,856 ------ ------ Total revenue 158,784 223,601 ------- ------- Cost of revenue: Product 27,041 46,643 Service 32,986 33,919 ------ ------ Total cost of revenue 60,027 80,562 ------ ------ Gross profit 98,757 143,039 ------ ------- Gross profit % Product 69.7% 68.9% Service 52.6% 54.1% Total gross profit % 62.2% 64.0% Operating expenses: Research and development 45,995 57,101 Sales and marketing 36,018 55,412 General and administrative 32,259 44,660 Litigation settlements - 19,100 Restructuring 3,510 - ------ ------ Total operating expenses 117,782 176,273 ------- ------- Loss from operations (19,025) (33,234) Interest expense (94) (257) Interest income 3,513 10,097 Other income, net 24 387 ------ ------ Loss from continuing operations before income taxes (15,582) (23,007) Income tax benefit 341 6,365 ------ ------ Loss from continuing operations (15,241) (16,642) Loss from discontinued operations, net of tax - (4,308) ------ ------ Net loss $(15,241) $(20,950) ======== ======== Loss per share: Basic Continuing operations $(0.06) $(0.06) Discontinued operations - (0.02) ------ ------ $(0.06) $(0.08) ====== ====== Diluted Continuing operations $(0.06) $(0.06) Discontinued operations - (0.02) ------ ------ $(0.06) $(0.08) ====== ====== Shares used to compute loss per share: Basic 273,518 271,121 Diluted 273,518 271,121

SONUS NETWORKS, INC. Condensed Consolidated Balance Sheets (in thousands) (unaudited) September 30, December 31, 2009 2008 ------ ----- Assets Current assets: Cash and cash equivalents $178,905 $122,207 Marketable securities 158,771 180,786 Accounts receivable, net 34,054 75,788 Inventory, net 22,183 22,553 Deferred income taxes 223 111 Other current assets 16,379 14,937 ------ ------ Total current assets 410,515 416,382 Property and equipment, net 15,451 17,852 Intangible assets, net 379 568 Goodwill 5,046 5,025 Investments 56,521 84,965 Deferred income taxes 1,756 1,611 Other assets 18,969 9,182 ------ ----- $508,637 $535,585 ======== ======== Liabilities and stockholders' equity Current liabilities: Accounts payable $6,300 $9,200 Accrued expenses 15,718 28,231 Accrued litigation settlements - 9,600 Current portion of deferred revenue 52,888 40,962 Current portion of long-term liabilities 977 1,301 ------ ----- Total current liabilities 75,883 89,294 Deferred revenue 30,545 37,991 Long-term liabilities 1,214 1,865 ----- ----- Total liabilities 107,642 129,150 ------- ------- Commitments and contingencies Stockholders equity: Common stock 277 275 Additional paid-in capital 1,283,570 1,272,952 Accumulated deficit (889,119) (873,878) Accumulated other comprehensive income 6,534 7,353 Treasury stock (267) (267) ------ ----- Total stockholders' equity 400,995 406,435 ------- ------- $508,637 $535,585 ======== ========

SONUS NETWORKS, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Nine months ended September 30, ----------------- 2009 2008 ---- ---- Cash flows from operating activities: Net loss $(15,241) $(20,950) Adjustments to reconcile net loss to cash flows provided by (used in) operating activities: Depreciation and amortization of property and equipment 7,497 9,273 Amortization of intangible assets 184 852 Stock-based compensation 9,889 19,544 Impairment of intangible assets and goodwill - 3,630 Loss on disposal of property and equipment 173 157 Deferred income taxes (137) (6,896) Changes in operating assets and liabilities: Accounts receivable 41,600 42,631 Inventory (4,217) (7,828) Insurance receivable - litigation settlement - 15,328 Other operating assets (7,516) 3,189 Accounts payable (3,212) (4,107) Accrued expenses and deferred rent (12,999) (16,016) Litigation settlement liability (9,600) (30,400) Deferred revenue 4,240 (11,350) ----- ------- Net cash provided by (used in) operating activities 10,661 (2,943) ------ ------ Cash flows from investing activities: Purchases of property and equipment (4,813) (6,968) Business acquisition, net of cash acquired - (4,909) Purchases of marketable securities (179,416) (280,717) Sale/maturities of marketable securities 228,979 262,040 Decrease in litigation settlement escrow - 25,000 ------ ------ Net cash provided by (used in) investing activities 44,750 (5,554) ------ ------ Cash flows from financing activities: Sale of common stock in connection with employee stock purchase plan 1,119 3,756 Proceeds from exercise of stock options 32 425 Payment of tax withholding obligations related to net share settlements of restricted stock awards (531) (1,236) Principal payments of capital lease obligations (189) (166) ---- ---- Net cash provided by financing activities 431 2,779 --- ----- Effect of exchange rate changes on cash and cash equivalents 856 (83) --- --- Net increase (decrease) in cash and cash equivalents 56,698 (5,801) Cash and cash equivalents, beginning of period 122,207 118,933 ------- ------- Cash and cash equivalents, end of period $178,905 $113,132 ======== ========

SONUS NETWORKS, INC. Supplemental Information (In thousands) (unaudited) The following tables provide the details of stock-based compensation, amortization of intangible assets, an earnout settlement related to our Zynetix acquisition and a change in estimate of a loss contingency related to an employment tax audit included in the Company's Condensed Consolidated Statements of Operations and the line items in which these amounts are reported. Additional information regarding these items is available in the Investor Relations section of our Corporate page at http://www.sonusnet.com. The information contained on our website or that can be accessed through our website should not be considered to be part of, or incorporated into, this press release. Three months ended Nine months ended ------------------ ----------------- Sept. June Sept. Sept. Sept. 30, 30, 30, 30, 30, 2009 2009 2008 2009 2008 ---- ---- ---- ---- ---- Stock-based compensation Cost of revenue - product $67 $115 $195 $298 $583 Cost of revenue - service 483 387 554 1,335 2,266 --- --- --- ----- ----- Cost of revenue 550 502 749 1,633 2,849 --- --- --- ----- ----- Research and development expense 774 1,102 1,373 2,643 6,708 Sales and marketing expense 885 1,490 987 3,419 4,168 General and administrative expense 930 616 2,347 2,194 5,679 --- --- ----- ----- ----- Operating expense 2,589 3,208 4,707 8,256 16,555 ----- ----- ----- ----- ------ Total stock-based compensation $3,139 $3,710 $5,456 $9,889 $19,404 ====== ====== ====== ====== ======= Amortization of intangible assets Cost of revenue - product $40 $48 $263 $184 $573 Sales and marketing expense - - 55 - 117 ----- ----- ----- ----- ------ Total amortization of intangible assets $40 $48 $318 $184 $690 === === ==== ==== ==== Earnout settlement - Zynetix General and administrative expense $- $- $1,685 $- $1,685 === === ====== === ====== Change in estimate - reduction of loss contingency related to employment tax audit (1) Cost of revenue - product $- $- $- $- $(7) --- --- --- --- --- Research and development expense - - - - (51) Sales and marketing expense - - - - (96) General and administrative expense - - - - (387) --- --- --- --- ---- Operating expense - - - - (534) --- --- --- --- ---- Other income (expense) - - - - 379 --- --- --- --- ---- Total change in estimate - reduction of loss contingency related to employment tax audit $- $- $- $- $(920) === === === === ===== (1) Change in estimate resulting in a reduction of the loss contingency related to the settlement of an employment tax audit by the Internal Revenue Service that had resulted from the stock option review and subsequent restatement.

SOURCE Sonus Networks, Inc.

Source: PR Newswire

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