2014

ShoreTel Reports Financial Results for Second Quarter of Fiscal Year 2013 Cloud Division Growth Drives 29 Percent Year Over Year Revenue Improvement

SUNNYVALE, Calif., Jan. 30, 2013 /PRNewswire/ -- ShoreTel® (NASDAQ; SHOR), the leading provider of brilliantly simple unified communications platforms, including business phone systems, applications and mobile UC solutions, today announced financial results for the second quarter of fiscal year 2013, which ended December 31, 2012.

Revenue of $74.6 million for the second quarter of fiscal year 2013 was up 29 percent from the second quarter of fiscal year 2012. The non-GAAP net loss for the second quarter was $(2.6) million, or $(0.04) per share, which excludes stock-based compensation charges, amortization of acquisition-related intangibles, other charges and related tax adjustments. This compares with non-GAAP net income of $1.4 million, or $0.03 per share, in the second quarter of fiscal 2012.

"Our ShoreTel Sky business continues to be very strong with December marking our best month of cloud bookings in our history," said Peter Blackmore, president and CEO of ShoreTel.  "We were also pleased to sign a record number of new cloud customers, which together with a strong backlog and low churn, drove 9 percent sequential cloud revenue growth in the quarter and has driven our recurring revenue base up to 35 percent of our total revenue."

Blackmore added, "In early January, we took meaningful action to reorganize our global sales organization to drive improved sales productivity. I am confident these changes will yield improved results over the long term and put ShoreTel on a solid path to profitability."

Second Quarter of Fiscal 2013 Financial Highlights

GAAP gross margin for the second quarter of fiscal year 2013 was 58.8 percent, compared with 65.4 percent in the second quarter of fiscal year 2012. The decline in gross margin percentage from last year is the result of the addition of the ShoreTel cloud division including the amortization of acquisition related intangibles, which were not included in the prior year's results.

Non-GAAP gross margin for the second quarter of fiscal year 2013, which excludes stock-based compensation charges, amortization of acquisition-related intangibles, other charges and related tax adjustments, was 61.8 percent, compared with 66.1 percent in the year-ago quarter. GAAP net loss was $(10.4) million, or $(0.18) per share, in the second quarter of fiscal year 2013, compared with a GAAP net loss of $(2.5) million, or $(0.05) per share, in the second quarter of fiscal 2012. The GAAP net loss in the second quarter of fiscal year 2013 includes a $1.9 million charge for a change in estimates for sales, telecom taxes and regulatory fees related to prior periods.

As of December 31, 2012, the company had $52.1 million in cash, cash equivalents and short-term investments, and generated $1.1 million in cash flow from operations in the quarter.

Line of Business Results

Cloud

The cloud division continued to deliver strong revenue growth of 9 percent sequentially over the first fiscal quarter, with revenues of $17.1 million. Monthly recurring revenue grew by 25 percent from the second fiscal quarter of 2012, and the total number of installed customer seats increased 38 percent over the same period. Partnerships with previously premise-only channel partners continued to develop and there is a strong pipeline of new partners waiting to become certified cloud business partners.

Premise

The company's premise-business revenues were $57.5 million for the second quarter of fiscal 2013, down 1 percent from the prior year. Revenue from the company's international locations was up 8 percent over the year-ago quarter and represented 13 percent of its premise revenue in the quarter. The company's typical second quarter seasonal growth was muted due to an increase in deals being delayed beyond the end of the quarter.



Select Operational Metrics






Quarter Ended


Quarter Ended


Quarter Ended






12/31/12


09/30/12


06/30/12











Cloud Monthly Average Revenue Per User (ARPU)

$               60


$             61


$             62











Cloud Average # of Seats per Subscriber

36


35


34











Cloud Monthly Revenue Churn Rate

0.3%


0.3%


0.3%











Total Company Headcount

965


942


933











Non-GAAP Gross Margins-Premise

67.3%


67.2%


67.1%

Non-GAAP Gross Margins-Cloud

43.3%


46.7%


42.2%













Business Highlights

ShoreTel's Cloud Division Earns Frost & Sullivan's Award for Hosted IP Telephony and UC Services

In November, the company announced that Frost & Sullivan had given its 2012 North American Customer Value Enhancement Award in the Hosted IP Telephony and UC Services market to ShoreTel's Cloud Division. The Frost & Sullivan Award for Customer Value Enhancement is presented each year to the company that has demonstrated excellence in implementing strategies that proactively create value for its customers with a focus on improving the return on the investment that customers make in its services or products. 

ShoreTel Positioned in the Leaders Quadrant of the Magic Quadrant for Unified Communications as a Service

The company was positioned by Gartner, Inc. in the Leaders quadrant of the Magic Quadrant for Unified Communications as a Service, North America1 based on ShoreTel's cloud division with its ShoreTel Sky family of products.

Business Outlook

ShoreTel is providing the following outlook for the quarter ending Mar. 31, 2013:

  • Revenue is expected to be in the range of $73 million to $79 million.
  • GAAP gross margin is expected to be in the range of 60 percent to 61 percent, including approximately $1.2 million in stock-based compensation charges and amortization of acquisition-related intangibles. Non-GAAP gross margin, which excludes stock-based compensation and other charges, is expected to be in the range of 62 percent to 63 percent.
  • GAAP operating expenses are expected to be in the range of $53 million to $54 million, including approximately $3.3 million in stock-based compensation charges and amortization of acquisition-related intangibles and $0.7 million in severance costs related to sales reorganization actions in January 2013. Non-GAAP operating expenses, which exclude stock-based compensation and other charges listed above, are expected to be in the range of $49 million to $50 million.

Conference Call Information

The company will host a corresponding conference call and live webcast today at 2:00 p.m. Pacific Standard Time. To access the conference call, dial +1-877-317-6789 for callers in the U.S. and +1-412-317-6789 for international callers and provide the operator with the conference identification number of 10023317. A live webcast will be available in the Investor Relations section of the company's corporate website at http://ir.shoretel.com/ and an archived recording will be available beginning approximately two hours after the completion of the call until the company's announcement of its financial results for the next quarter. An audio telephonic replay of the conference call will also be available beginning at approximately 4:00 p.m. Pacific Standard Time today until approximately 6:00 a.m. Pacific Standard Time on Feb. 7, 2013, by dialing +1-877-344-7529 or +1-412-317-0088 for callers outside the U.S. and Canada and providing the conference identification number of 10023317.

Use of Non-GAAP Financial Measures

ShoreTel reports all required financial information in accordance with generally accepted accounting principles in the United States ("GAAP"), but it believes that evaluating its ongoing operating results may be difficult to understand if limited to reviewing only GAAP financial measures. Many investors have requested that ShoreTel disclose this non-GAAP information because it is useful in understanding the company's performance as it excludes non-cash charges, other non-recurring adjustments and related tax adjustments, that many investors feel may obscure the company's true operating performance. Likewise, management uses these non-GAAP measures to manage and assess the profitability of its business and does not consider stock-based compensation charges and amortization charges related to acquisition-related intangible assets, which are non-cash charges, or other non-recurring items in managing its core operations. ShoreTel has provided a reconciliation of non-GAAP financial measures following the text of this press release. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.

Legal Notice Regarding Forward-Looking Statements

ShoreTel assumes no obligation to update the forward-looking statements included in this release. This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the federal securities laws, including, without limitation, statements by Peter Blackmore, statements regarding future products and statements in the "Business Outlook" section regarding ShoreTel's anticipated future revenues, gross margins, operating expenses and other financial information. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. The risks and uncertainties include the intense competition in our industry, our reliance on third parties to sell and support our products, supply and manufacturing risks, our ability to control costs as we expand our business, increased risk of intellectual property litigation by entering into new markets, our ability to attract, retain and ramp new sales personnel, uncertainties inherent in the product development cycle, uncertainty as to market acceptance of new products and services, the potential for litigation in our industry, risks related to our acquisition of M5 Networks, including technology and product integration risks, ability to retain key personnel and customers and the risk of assuming unknown liabilities, and other risk factors set forth in ShoreTel's Form 10-K for the year ended June 30, 2012, and in its Form 10-Q for the quarter ended September 30, 2012.

Related Links & Conversation

About ShoreTel

ShoreTel, Inc. (NASDAQ: SHOR) is a provider of business communication solutions whose brilliantly simple unified communications platforms, applications and mobile UC solutions promise a new rhythm of workforce engagement and collaboration. With costly complexity eliminated by design from its award-winning, all-in-one IP phone system, UC and contact center solution, and its industry-leading hosted phone system, workers enjoy a freedom and self-reliance that other providers can't match. Users have full control to engage and collaborate, no matter the time, place or device, for the lowest cost and demand on IT resources in the industry. ShoreTel is headquartered in Sunnyvale, Calif., and has regional offices and partners worldwide. For more information, visit shoretel.com or shoretelsky.com.

M5, ShoreTel, ShoreTel Sky, and the ShoreTel logo are trademarks or registered trademarks of ShoreTel, Inc. in the United States and/or other countries.

1 Gartner does not endorse any vendor, product or service depicted in our research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.



SHORETEL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)







As of


As of


As of 






December 31,


September 30, 


June 30,






2012


2012


2012











ASSETS






Current assets:







Cash and cash equivalents

$               43,839


$               41,215


$               37,120


Short-term investments

8,217


13,933


18,375


Accounts receivable - net 

31,834


30,302


34,198


Inventories

20,383


19,053


20,212


Indemnification asset

7,012


6,570


6,570


Prepaid expenses and other current assets

5,478


6,016


5,275




Total current assets

116,763


117,089


121,750










Property and equipment - net 

14,502


11,693


10,495

Goodwill

122,665


122,665


122,665

Intangible assets

42,128


43,692


45,304

Other assets

2,769


2,578


2,939




Total assets

$             298,827


$             297,717


$             303,153



















LIABILITIES AND STOCKHOLDERS' EQUITY















Current liabilities:







Accounts payable 

$               12,316


$                 9,225


$                 9,697


Accrued liabilities and other

15,178


17,019


16,134


Accrued employee compensation

13,088


11,652


12,151


Accrued taxes and surcharges

11,026


8,170


7,852


Purchase consideration

9,881


9,537


9,398


Deferred revenue

37,503


35,960


35,829




Total current liabilities

98,992


91,563


91,061











Line of credit - net

19,960


19,966


19,946


Long-term deferred revenue

14,373


14,246


13,683


Long-term purchase consideration

3,475


3,354


3,305


Other long-term liabilities

3,064


3,624


4,926




Total liabilities

139,864


132,753


132,921










Stockholders' equity:
















Common stock

317,770


313,417


310,648


Accumulated deficit

(158,807)


(148,453)


(140,416)




Total stockholders' equity

158,963


164,964


170,232













Total liabilities and stockholders' equity 

$             298,827


$             297,717


$             303,153



SHORETEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

(Unaudited)








Three Months Ended


Six Months Ended




December 31,


December 31,




2012


2011


2012


2011







Revenue:









Product

$          43,769


$           46,277


$      89,603


$           88,461


Hosted and related services

17,087


-


32,749


-


Support and services

13,780


11,735


27,268


23,409



Total revenues

74,636


58,012


149,620


111,870

Cost of revenue:









Product

15,069


16,103


30,856


30,558


Hosted and related services

11,400


-


20,542


-


Support and services 

4,279


3,969


8,468


7,884



Total cost of revenue

30,748


20,072


59,866


38,442

Gross profit

43,888


37,940


89,754


73,428


Gross profit %

58.8%


65.4%


60.0%


65.6%











Operating expenses:









Research and development 

12,195


12,240


26,148


24,053


Sales and marketing 

31,739


21,596


62,495


42,818


General and administrative 

9,292


6,349


17,887


12,978



Total operating expenses

53,226


40,185


106,530


79,849

Loss from operations

(9,338)


(2,245)


(16,776)


(6,421)

Other income (expense) - net 

(926)


(196)


(1,328)


(595)

Loss before provision for income tax

(10,264)


(2,441)


(18,104)


(7,016)

Provision for income tax

90


97


287


164

Net loss

$        (10,354)


$           (2,538)


$        (18,391)


$           (7,180)

Net loss per share:









Basic and diluted

$            (0.18)


$             (0.05)


$            (0.32)


$             (0.15)











Shares used in computing net loss per share:









Basic and diluted

58,566


47,946


58,376


47,666



SHORETEL, INC.

GAAP to Non-GAAP Reconciliation

(Amounts in thousands, except per share amounts)

(Unaudited)


















Three Months Ended


Six Months Ended




December 31, 2012


December 31, 2012




GAAP


Excludes 


Non-GAAP


GAAP


Excludes 


Non-GAAP

Revenue:













Product

$      43,769


$              -


$      43,769


$      89,603


$              -


$      89,603


Hosted and related services

17,087


-


17,087


32,749


-


32,749


Support and services

13,780


-


13,780


27,268


-


27,268



Total revenues

74,636


-


74,636


149,620


-


149,620

Cost of revenue:













Product

15,069


(294)

 (a),(b)  

14,775


30,856


(604)

 (a),(b)  

30,252


Hosted and related services

11,400


(1,716)

 (a),(b),(e) 

9,684


20,542


(2,511)

 (a),(b),(c),(e) 

18,031


Support and services

4,279


(239)

 (a) 

4,040


8,468


(448)

 (a),(c) 

8,020



Total cost of revenue

30,748


(2,249)


28,499


59,866


(3,563)


56,303

Gross profit

43,888


2,249


46,137


89,754


3,563


93,317


Gross profit %

58.8%




61.8%


60.0%




62.4%















Operating expenses:













Research and development

12,195


(919)

 (a) 

11,276


26,148


(2,077)

 (a),(c) 

24,071


Sales and marketing 

31,739


(1,924)

 (a),(b)  

29,815


62,495


(3,872)

 (a),(b),(c) 

58,623


General and administrative 

9,292


(2,180)

 (a),(b),(e) 

7,112


17,887


(3,393)

 (a),(b),(c),(e) 

14,494



Total operating expenses

53,226


(5,023)


48,203


106,530


(9,342)


97,188

Loss from operations

(9,338)


7,272


(2,066)


(16,776)


12,905


(3,871)

Other income (expense) - net

(926)


465

 (d) 

(461)


(1,328)


653

 (d) 

(675)

Loss before provision for income tax

(10,264)


7,737


(2,527)


(18,104)


13,558


(4,546)

Provision for income tax

90


(2)

 (f) 

88


287


(145)

 (f) 

142

Net loss

$    (10,354)


$        7,739


$      (2,615)


$    (18,391)


$      13,703


$      (4,688)

Net loss per share:













Basic and diluted (g)

$        (0.18)


$          0.14


$        (0.04)


$        (0.32)


$          0.24


$        (0.08)















Shares used in computing net loss per share: 













Basic and diluted (g)

58,566




58,566


58,376




58,376





























(a)

Excludes stock-based compensation included in:












Cost of product revenue

$             34






$             84





Cost of hosted and related services revenue

40






78





Cost of support and services revenue

239






446





Research and development

919






1,978





Sales and marketing

1,073






1,935





General and administrative

1,194






2,331








$        3,499






$        6,852

















(b) 

Excludes amortization of acquisition-related intangibles included in:












Cost of product revenue

$           260






$           520





Cost of hosted and related services

749






1,498





Sales and marketing

851






1,702





General and administrative

38






76








$        1,898






$        3,796

















(c)

Excludes severance included in: 












Cost of hosted and related services

$              -






$               8





Cost of support and services revenue

-






2





Research and development

-






99





Sales and marketing

-






235





General and administrative

-






38








$              -






$           382

















(d)

Excludes interest charge from change in fair value of contingent consideration included in:










Other expense

$           465






$           653

















(e)

Excludes prior quarter charge for change in estimate of sales, use and telecommunications tax recognized in the current quarter:





Cost of hosted and related services

$           927






$           927





General and administrative

948






948








$        1,875






$        1,875

















(f)

Excludes the deferred tax benefit arising from acquisition and tax impact of the items which are excluded in (a) to (e) above. 



















(g)

Potentially dilutive securities were not included in the calculation of diluted net loss per share for the periods which had a net loss because to do so would have been dilutive.

 



SHORETEL, INC.

GAAP to Non-GAAP Reconciliation

(Amounts in thousands, except per share amounts)










Three Months Ended


Six Months Ended




December 31, 2011


December 31, 2011




GAAP


Excludes 


Non-GAAP


GAAP


Excludes 


Non-GAAP

Revenue:













Product

$       46,277


$              -


$       46,277


$       88,461


$              -


$       88,461


Support and services

11,735


-


11,735


23,409


-


23,409



Total revenues

58,012


-


58,012


111,870


-


111,870

Cost of revenue













Product

16,103


(218)

 (a),(b)  

15,885


30,558


(444)

 (a),(b)  

30,114


Support and services

3,969


(209)

 (a) 

3,760


7,884


(408)

 (a) 

7,476



Total cost of revenue

20,072


(427)


19,645


38,442


(852)


37,590

Gross profit

37,940


427


38,367


73,428


852


74,280


Gross profit %

65.4%




66.1%


65.6%




66.4%















Operating expenses:













Research and development

12,240


(911)

 (a) 

11,329


24,053


(1,923)

 (a) 

22,130


Sales and marketing 

21,596


(1,083)

 (a),(b)  

20,513


42,818


(2,127)

 (a),(b)  

40,691


General and administrative 

6,349


(1,566)

 (a),(c) 

4,783


12,978


(2,550)

 (a),(c) 

10,428



Total operating expenses

40,185


(3,560)


36,625


79,849


(6,600)


73,249

Income (Loss) from operations

(2,245)


3,987


1,742


(6,421)


7,452


1,031

Other income (expense), net 

(196)


-


(196)


(595)


-


(595)

Income (Loss) before provision for income tax

(2,441)


3,987


1,546


(7,016)


7,452


436

Provision for income tax

97


12

 (d) 

109


164


12

 (d) 

176

Net income (loss)

$       (2,538)


$         3,975


$         1,437


$       (7,180)


$         7,440


$            260

Net income (loss) per share:













Basic and diluted (e)

$         (0.05)


$           0.08


$           0.03


$         (0.15)


$           0.16


$           0.01















Shares used in computing net loss per share: 













Basic and diluted (e)

47,946




47,946


47,666




47,666





























(a)

Excludes stock-based compensation as follows:












Cost of product revenue

$              33






$              74





Cost of support and services revenue

209






408





Research and development

911






1,923





Sales and marketing

1,053






2,067





General and administrative

1,066






2,050








$         3,272






$         6,522

















(b) 

Excludes amortization of acquisition-related intangibles:












Cost of product revenue

$            185






$            370





Sales and marketing

30






60








$            215






$            430

















(c)

Excludes litigation settlement included in: 











General and administrative

$            500






$            500

















(d)

Excludes the tax impact of the items which are excluded in (a) to (c) above. 



















(e)

Potentially dilutive securities were not included in the calculation of diluted net loss per share for the periods which had a net loss because to do so would have been dilutive.



SHORETEL, INC.

RECONCILIATION OF GAAP TO NON-GAAP FOR Q3 PROJECTIONS

(Amounts in thousands)

(Unaudited)






Three Months Ending



March 31, 2013








High


Low


GAAP gross profit %

61.0%


60.0%


Adjustments for stock-based compensation and acquisition-related intangible asset amortization

2.0%


2.0%


Non-GAAP gross profit %

63.0%


62.0%







Total GAAP operating expenses

$     54,000


$     53,000


Adjustments for stock-based compensation and acquisition-related intangible asset amortization

$      (4,000)


$      (4,000)


Total non-GAAP operating expenses

$     50,000


$     49,000

Investor Contact:
Tonya Chin
408-962-2573
tchin@shoretel.com

SOURCE ShoreTel



RELATED LINKS
http://www.shoretel.com

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.