Sonus Networks Reports 2010 Second Quarter Results

News provided by

Aug 03, 2010, 04:05 ET

WESTFORD, Mass., Aug. 3 /PRNewswire-FirstCall/ -- Sonus Networks, Inc. (Nasdaq: SONS), a market leader in next generation IP-based network solutions, today announced results for the quarter ended June 30, 2010.

Revenue for the second quarter of fiscal 2010 was $61.2 million, compared to $62.4 million in the first quarter of fiscal 2010 and $61.6 million for the second quarter of fiscal 2009. The Company's net income on a GAAP basis for the second quarter of fiscal 2010 was $0.3 million, or $0.00 per diluted share, compared to a net loss of $0.1 million, or $0.00 per share, for the first quarter of fiscal 2010, and net income of $4.4 million, or $0.02 per diluted share, for the second quarter of fiscal 2009.

"We are pleased with our solid operating results in the second quarter," said Richard Nottenburg, President and Chief Executive Officer of Sonus Networks. "During the quarter, we successfully launched the NBS-5200 Network Border Switch on our next generation ConnexIP platform and are pleased with the traction we have made to date."

Conference Call Details:

Sonus Networks will host a conference call for analysts and investors to discuss its second quarter 2010 results as well as certain forward-looking information today at 4:45 p.m. ET.

To listen live via telephone:

Dial-in number: 800-671-2810

International Callers: +1 303-223-2684

To listen via internet:

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

About Sonus Networks

Sonus Networks, Inc. is a leader in IP networking with proven expertise in delivering secure, reliable and scalable next generation infrastructure and subscriber solutions. With customers in over 50 countries across the globe and over a decade of experience in transforming networks to IP, Sonus has enabled service providers and enterprises to capture and retain users and generate significant ROI. Sonus products include media and signaling gateways, policy/routing servers, session border controllers and subscriber feature servers. Sonus products are supported by a global services team with experience in design, deployment and maintenance of some of the world's largest and most complex IP networks. 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. Readers are referred to Item 1A "Risk Factors" of Sonus' Annual Report on Form 10-K for the year ended December 31, 2009, Form 10-Q for the quarter ended March 31, 2010 and Form 10-Q for the quarter ended June 30, 2010, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. 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:

Wayne Pastore	Fran Murphy
978-614-8291	978-614-8148
[email protected]	[email protected]

SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)


			Three months ended
			June 30,	March 31,	June 30,
			2010	2010	2009
Revenue:
	Product		$ 36,796	$ 36,278	$ 36,320
	Service		24,385	26,130	25,287
		Total revenue	61,181	62,408	61,607

Cost of revenue:
	Product		10,826	12,301	10,747
	Service		11,842	11,929	10,568
		Total cost of revenue	22,668	24,230	21,315

Gross profit			38,513	38,178	40,292

Gross profit %
	Product		70.6%	66.1%	70.4%
	Service		51.4%	54.3%	58.2%
		Total gross profit %	62.9%	61.2%	65.4%

Operating expenses:
	Research and development		15,106	14,940	15,501
	Sales and marketing		12,392	13,594	12,344
	General and administrative		10,971	10,144	10,186
	Restructuring		-	-	(7)
		Total operating expenses	38,469	38,678	38,024

Income (loss) from operations			44	(500)	2,268
Interest expense			(30)	(13)	8
Interest income			466	515	1,077
Other income, net			1	10	19

Income before income taxes			481	12	3,372
Income tax benefit (provision)			(170)	(146)	1,011

Net income (loss)			$ 311	$ (134)	$ 4,383

Earnings (loss) per share:
	Basic
	Diluted		$ -	$ -	$ 0.02
			$ -	$ -	$ 0.02
Shares used to compute earnings (loss) per share:
	Basic		275,051	274,701	273,543
	Diluted		276,314	274,701	273,768

SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)


			Six months ended
			June 30,	June 30,
			2010	2009
Revenue:
	Product		$ 73,074	$ 55,723
	Service		50,515	46,896
		Total revenue	123,589	102,619

Cost of revenue:
	Product		23,127	16,881
	Service		23,771	22,231
		Total cost of revenue	46,898	39,112

Gross profit			76,691	63,507

Gross profit %
	Product		68.4%	69.7%
	Service		52.9%	52.6%
		Total gross profit %	62.1%	61.9%

Operating expenses:
	Research and development		30,046	31,854
	Sales and marketing		25,986	24,491
	General and administrative		21,115	20,681
	Restructuring		-	1,977
		Total operating expenses	77,147	79,003

Loss from operations			(456)	(15,496)
Interest expense			(43)	(71)
Interest income			981	2,726
Other income, net			11	12

Income (loss) before income taxes			493	(12,829)
Income tax benefit (provision)			(316)	985

Net income (loss)			$ 177	$ (11,844)

Earnings (loss) per share:
	Basic
	Diluted		$ -	$ (0.04)
			$ -	$ (0.04)
Shares used to compute earnings (loss) per share:
	Basic		274,877	273,320
	Diluted		276,038	273,320

SONUS NETWORKS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)


				June 30,	December 31,
				2010	2009
Assets
Current assets:
	Cash and cash equivalents			$ 103,788	$ 125,323
	Marketable securities			249,393	239,223
	Accounts receivable, net			40,188	47,998
	Inventory, net			21,181	21,925
	Deferred income taxes			669	562
	Other current assets			20,394	17,508
		Total current assets		435,613	452,539

Property and equipment, net				14,355	14,646
Intangible assets, net				2,065	341
Goodwill				5,053	5,053
Investments				66,474	49,598
Deferred income taxes				780	711
Other assets				22,623	17,849
				$ 546,963	$ 540,737

Liabilities and stockholders' equity
Current liabilities:
	Accounts payable			$ 18,619	$ 5,337
	Accrued expenses			17,584	19,292
	Current portion of deferred revenue			57,141	74,748
	Current portion of long-term liabilities			484	753
		Total current liabilities		93,828	100,130

Deferred revenue				31,703	25,242
Long-term liabilities				1,042	1,127
			Total liabilities	126,573	126,499

Commitments and contingencies

Stockholders equity:
	Common stock			278	277
	Additional paid-in capital			1,292,492	1,286,326
	Accumulated deficit			(878,633)	(878,810)
	Accumulated other comprehensive income			6,520	6,712
	Treasury stock			(267)	(267)
			Total stockholders' equity	420,390	414,238
				$ 546,963	$ 540,737

SONUS NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)


					Six months ended
					June 30,	June 30,
					2010	2009
Cash flows from operating activities:
	Net income (loss)				$ 177	$ (11,844)
	Adjustments to reconcile net income (loss) to cash flows provided by operating activities:
		Depreciation and amortization of property and equipment			4,804	5,004
		Amortization of intangible assets			276	153
		Stock-based compensation			5,698	6,750
		Loss on disposal of property and equipment			59	15
		Deferred income taxes			-	(208)
		Changes in operating assets and liabilities:
			Accounts receivable		7,778	37,714
			Inventory		(5,201)	(5,204)
			Other operating assets		261	(13,472)
			Accounts payable		12,989	1,204
			Accrued expenses		(1,828)	(11,275)
			Accrued litigation settlements		-	(100)
			Deferred revenue		(11,181)	3,645
				Net cash provided by operating activities	13,832	12,382

Cash flows from investing activities:
	Purchases of property and equipment				(4,276)	(3,352)
	Purchase of intangible assets				(2,000)	-
	Purchases of marketable securities				(168,953)	(61,926)
	Sale/maturities of marketable securities				139,620	153,738
	Increase in litigation settlement escrow				-	(9,500)
				Net cash provided by (used in) investing activities	(35,609)	78,960

Cash flows from financing activities:
	Sale of common stock in connection with employee stock purchase plan				609	529
	Proceeds from exercise of stock options				61	1
	Payment of tax withholding obligations related to net share settlements of restricted stock awards				(257)	(287)
	Principal payments of capital lease obligations				(110)	(124)
				Net cash provided by financing activities	303	119


Effect of exchange rate changes on cash and cash equivalents					(61)	407

Net increase (decrease) in cash and cash equivalents					(21,535)	91,868
Cash and cash equivalents, beginning of year					125,323	122,207
Cash and cash equivalents, end of period					$ 103,788	$ 214,075

SONUS NETWORKS, INC.
Supplemental Information
(In thousands)
(unaudited)


The following tables provide the details of stock-based compensation and amortization of intangible assets 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 website 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			Six months ended
				June 30,	March 31,	June 30,	June 30,	June 30,
				2010	2010	2009	2010	2009
Stock-based compensation
	Cost of revenue - product			$ 89	$ 71	$ 115	$ 160	$ 231
	Cost of revenue - service			404	419	387	823	852
		Cost of revenue		493	490	502	983	1,083

	Research and development expense			665	606	1,102	1,271	1,869
	Sales and marketing expense			688	729	1,490	1,417	2,534
	General and administrative expense			1,366	661	616	2,027	1,264
		Operating expense		2,719	1,996	3,208	4,715	5,667

			Total stock-based compensation	$ 3,212	$ 2,486	$ 3,710	$ 5,698	$ 6,750


Amortization of intangible assets
	Cost of revenue - product			$ 38	$ 38	$ 48	$ 76	$ 144
	Research and development			100	100	-	200	-
			Total amortization of intangible assets	$ 138	$ 138	$ 48	$ 276	$ 144