Form 8-K RADISYS CORP For: Feb 09
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 8, 2016
RADISYS CORPORATION
(Exact name of registrant as specified in its charter)
Oregon | 0-26844 | 93-0945232 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
5435 NE Dawson Creek Drive | |
Hillsboro, Oregon | 97124 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant's telephone number, including area code: (503) 615-1100
No Change
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On February 8, 2016, Radisys Corporation (the “Company” or “Radisys”) entered into Amendment No. 3 (the "Third Amendment”) to the Third Amended and Restated Loan and Security Agreement between the Company and Silicon Valley Bank dated March 14, 2014. The Third Amendment extends the maturity date of the secured revolving credit facility to February 8, 2018 from July 28, 2016. The Third Amendment increases the total amount available under the revolving credit facility for cash borrowings, which is subject to a borrowing formula based upon eligible accounts receivable, to $35 million from $25 million. The Third Amendment also increases the foreign accounts receivable eligible under the borrowing formula to 75% (80% in certain cases). Previously, 65% (80% in certain cases) of foreign accounts receivable were eligible under the borrowing formula. The Third Amendment removes the financial covenant requiring the Company to (i) maintain an aggregate amount of at least $4 million in operating and other deposit and investment accounts with Silicon Valley Bank and its affiliates and (ii) ensure that at least 50% of the aggregate amount of the Company’s cash in all of its accounts at all financial institutions worldwide is in accounts maintained by Silicon Valley Bank or its affiliates or accounts with a financial institution as to which Silicon Valley Bank has received an account control agreement. The Third Amendment did not otherwise change the requirement for the Company to maintain its primary domestic operating and other deposit and investment accounts with Silicon Valley Bank and its affiliates.
Additionally, the Third Amendment requires the Company to maintain a minimum trailing twelve-month adjusted EBITDA of at least $10 million if the average outstanding principal balance is greater than $15 million or maintain a minimum trailing twelve-month adjusted EBITDA of at least $7.5 million if the average outstanding principal balance is equal to or less than $15 million, which is tested quarterly. The Third Amendment defines Adjusted EBITDA as net income plus interest expense plus, to the extent deducted in the calculation of net income, depreciation expense and amortization expense, plus income tax expense, plus non-cash stock compensation expense and restructuring costs, provided that trailing twelve-month restructuring costs are limited to $1.7 million, $1.1 million, and $1.0 million at the first, second and third quarter 2016 measurement dates and $0 thereafter.
The Third Amendment requires the Company to pay an annual commitment fee equal to $52,500. Previously, the commitment fee was $37,500. The Third Amendment decreased the cancellation fee that the Company is required to pay as a result of termination by the Company of the commitment under the revolving credit facility to 0.75% of the commitment under the revolving credit facility for a termination at any time after February 8, 2017 through the maturity date. The cancellation fee for any termination of the commitment by the Company on or before February 8, 2017 did not change. Previously, the cancellation fee for any termination by the Company of the commitment under the revolving credit facility prior to the maturity date was 1.5% of the commitment under the revolving credit facility.
The foregoing description of the Third Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Third Amendment, which is attached to this report as Exhibit 10.1 and is incorporated herein by reference.
Item 2.02 Results of Operations and Financial Condition.
The information in this Item 2.02 and the Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or any proxy statement or report or other document we may file with the Securities Exchange Commission (“SEC”), regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such filing.
On February 9, 2016 the Company issued a press release announcing its results for the fiscal quarter ended December 31, 2015. A copy of this press release is attached hereto as Exhibit 99.1.
This press release contains forward-looking statements, including statements about the Company's business strategy, changes in reporting segments, financial outlook and expectations for 2016 and for the first 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) continued implementation of the Company’s next-generation datacenter product, (b) customer implementation of traffic management solutions, (c) the outcome of product trials, (d) the market success of customers’ products and solutions, (e) the development and transition of new
products and solutions, (f) the enhancement of existing products and solutions to meet customer needs and respond to emerging technological trends, (g) the Company's dependence on certain customers and high degree of customer concentration, (h) 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, (i) matters affecting the software and embedded product industry, including changes in industry standards, changes in customer requirements and new product introductions, (j) actions by regulatory authorities or other third parties, (k) cash generation, (l) changes in tariff and trade policies and other risks associated with foreign operations, (m) fluctuations in currency exchange rates, (n) the ability of the Company to successfully complete any restructuring, acquisition or divestiture activities, (o) 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 (p) 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, 2014, 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 February 9, 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.
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 life insurance asset. 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.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibit
Exhibit Number | Description | |
10.1 | Amendment No. 3 to the Third Amended and Restated Loan and Security Agreement, dated February 8, 2016, between Radisys Corporation and Silicon Valley Bank. | |
99.1 | Fourth Quarter 2015 Earnings Release, dated February 9, 2016 | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
RADISYS CORPORATION | ||||
Date: | February 9, 2016 | By: | /s/ Jonathan Wilson | |
Jonathan Wilson | ||||
Chief Financial Officer and Vice President of Finance (Principal Financial and Accounting Officer) | ||||
EXHIBIT INDEX
Exhibit Number | Description | |
10.1 | Amendment No. 3 to the Third Amended and Restated Loan and Security Agreement, dated February 8, 2016, between Radisys Corporation and Silicon Valley Bank. | |
99.1 | Fourth Quarter 2015 Earnings Release, dated February 9, 2016. | |
Exhibit 10.1
AMENDMENT NO. 3
TO
THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDMENT NO. 3 TO THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
“Amendment”) is entered into as of February 8, 2016, by and among RADISYS CORPORATION, an Oregon
corporation (“Borrower”), and SILICON VALLEY BANK (“Bank”). Capitalized terms used herein without
definition shall have the same meanings given them in the Loan Agreement (as defined below).
BACKGROUND
A. Borrower and Bank have entered into that certain Third Amended and Restated Loan and Security
Agreement dated as of March 14, 2014 (as may be amended, restated, or otherwise modified, the “Loan
Agreement”), pursuant to which the Bank has extended and will make available to Borrower certain
advances of money.
B. Borrower desires that Bank amend the Loan Agreement, upon the terms and conditions more fully set forth
herein.
C. Subject to the representations and warranties of Borrower herein and upon the terms and conditions set
forth in this Amendment, Bank is willing to provide the amendment contained herein.
AGREEMENT
NOW, THEREFORE, in light of the foregoing background and intending to be legally bound, the parties hereto
agree as follows:
1. AMENDMENT TO THE LOAN AGREEMENT.
1.1 SECTION 2.5 (FEES). Section 2.5 of the Loan Agreement is hereby amended by changing subsections (c),
(d) and (e) to "(d,)" "(e)" and "(f)" respectively and inserting a new subsection (c) as follows:
"(c) Facility Fee. A fully earned, non-refundable facility fee of $52,500 annually, payable on January 1 of each year; provided that the facility fee for calendar year 2016 shall be prorated and payable on the Third Amendment Effective Date;”
Section 2.5(d) (previously Section 2.5(c)) of the Loan Agreement is hereby amended and restated in its entirety as follows:
“(d) Termination Fee. Upon termination of this Agreement for any reason prior to the Revolving Line Maturity Date, in addition to the payment of any other amounts then-owing, a termination fee in an amount equal to (i) one and one-half percent (1.50%) of the Revolving Line if termination occurs on or before the first anniversary of the Third Amendment Effective Date or (ii) three-quarters of a percent (0.75%) of the Revolving Line if termination occurs after the first anniversary of the Third Amendment Effective Date but prior to the Revolving Line Maturity Date; provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from Bank; and"
1.2 SECTION 6.8 (OPERATING ACCOUNTS). Subsection (b) of Section 6.8 of the Loan Agreement
is hereby amended and restated in its entirety as follows:
“(b) As of the Third Amendment Effective Date, and at all times thereafter, Borrower shall, and shall cause its Subsidiaries to, maintain Borrower’s and its Subsidiaries’ primary Domestic operating and other deposit and investment accounts with Bank and Bank’s Affiliates.”
1.3 SECTION 6.9 (FINANCIAL COVENANTS). Section 6.9 of the Loan Agreement is hereby amended by adding a new subsection (b) as follows:
“(b)Minimum Adjusted EBITDA. Minimum Adjusted EBITDA on a trailing twelve month basis measured as of the last day of each fiscal quarter as follows: (i) if either (1) the trailing 3-month average outstanding principal balance or (2) the outstanding principal balance at quarter end, is greater than $15,000,000, then Adjusted EBITDA shall be greater than or equal to $10,000,000; or (ii) if either (1) the trailing 3-month average outstanding principal balance or (2) the outstanding principal balance at quarter end is less than or equal to $15,000,000, then Adjusted EBITDA shall be greater than or equal to $7,500,000.”
1.4 SECTION 13.1 (DEFINITIONS). The following definition in Section 13.1 of the Loan Agreement
is hereby amended and restated in their entirety and replaced with the following:
‘“Borrowing Base” is (i) the sum of (a) 80% of Eligible Accounts, plus, without duplication, (b) 80% of Eligible Foreign Accounts where Nokia Siemens or Philips Medical (or one of their respective Subsidiaries) is the Account Debtor, plus, without duplication, (c) 75% of Eligible Foreign Accounts where neither Nokia Siemens nor Philips Medical (or one of their respective Subsidiaries) is the Account Debtor, minus (ii) any account payables that are aged over sixty (60) days from the invoice date (or, if there is no invoice, within sixty (60) days of the document date); provided, however, that Bank may decrease the foregoing percentages in its good faith business judgment based on events, conditions, contingencies, or risks which, a determined by Bank, may adversely affect Collateral.’
‘“Revolving Line”’ is an aggregate principal amount equal to Thirty-Five Million Dollars ($35,000,000).
‘“Revolving Line Maturity Date”’ is February 8, 2018.
1.5 SECTION 13.1 (DEFINITIONS). The following definitions are added to Section 13.1 of the Loan Agreement
in the appropriate alphabetical order:
‘“Adjusted EBITDA” shall mean (a) Net Income, plus (b) Interest Expense, plus (c) to the extent deducted in the calculation of Net Income, depreciation expense and amortization expense, plus (d) income tax expense, plus (e) non-cash stock compensation expense, plus (f) restructuring costs; provided that, for purposes of calculating Adjusted EBITDA, restructuring costs shall be limited as follows:
12 Month Period Ended: | Restructuring Costs |
3/31/2016 | $1,700,000 |
6/30/2016 | $1,140,000 |
9/30/2016 | $1,000,000 |
12/31/16 and thereafter | $— |
‘“Net Income” means, as calculated on a consolidated basis for Borrower and its Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period.’
‘“Third Amendment Effective Date” means February 8, 2016.’
1.6 EXHIBIT D (COMPLIANCE CERTIFICATE). Exhibit D to the Loan Agreement is amended and
restated in its entirety as set forth in Exhibit B hereto.
2. BORROWER’S REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants that:
(a) immediately upon giving effect to this Amendment, (i) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (ii) no Event of Default has occurred and is continuing;
(b) Borrower has the corporate power and authority to execute and deliver this Amendment and to
perform its obligations under the Loan Agreement, as amended by this Amendment;
(c) the certificate of incorporation, bylaws and other organizational documents of Borrower delivered
to Bank on the date of this Amendment remain true, accurate and complete and have not been
amended, supplemented or restated and are and continue to be in full force and effect;
(d) the execution and delivery by Borrower of this Amendment and the performance by Borrower of
its obligations under the Loan Agreement, as amended by this Amendment, have been duly
authorized by all necessary corporate action on the part of Borrower;
(e) this Amendment has been duly executed and delivered by the Borrower and is the binding
obligation of Borrower, enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium
or other similar laws of general application and equitable principles relating to or affecting
creditors’ rights; and
(f) as of the date hereof, it has no defenses against the obligations to pay any amounts under the
Obligations. Borrower acknowledges that Bank has acted in good faith and has conducted in a
commercially reasonable manner its relationships with such Borrower in connection with this
Amendment and in connection with the Loan Documents.
Borrower understands and acknowledges that Bank is entering into this Amendment in reliance upon, and in partial consideration for, the above representations and warranties, and agrees that such reliance is reasonable and
appropriate.
3. LIMITATION. The amendment set forth in Section 1 shall be limited precisely as written and shall not be
deemed (a) to be a forbearance, waiver or modification of any other term or condition of the Loan Agreement or of any other instrument or agreement referred to therein or to prejudice any right or remedy which Bank may now have or may have in the future under or in connection with the Loan Agreement or any instrument or agreement referred to therein; (b) to be a consent to any future consent or modification, forbearance or waiver to any instrument or agreement the execution and delivery of which is consented to hereby, or to any waiver of any of the provisions thereof; or (c) to limit or impair Bank’s right to demand strict performance of all terms and covenants as of any date.
4. EFFECTIVENESS. This Amendment shall become effective upon the satisfaction of all the
following conditions precedent:
4.1 Amendment. Borrower and Bank shall have duly executed and delivered this Amendment to Bank;
4.2 Reaffirmation of Guaranty. Radisys International LLC shall have duly executed
and delivered a Reaffirmation of Guaranty substantially in the form of Exhibit A attached hereto; and
4.3 Payment of Bank Expenses. Borrower shall have paid all Bank Expenses (including all reasonable
attorneys’ fees and reasonable expenses) incurred through the date of this Amendment.
5. COUNTERPARTS. This Amendment may be signed in any number of counterparts, and by different parties
hereto in separate counterparts, with the same effect as if the signatures to each such counterpart were upon a single instrument. All counterparts shall be deemed an original of this Amendment.
6. INTEGRATION. This Amendment and any documents executed in connection herewith or pursuant hereto
contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, offers and negotiations, oral or written, with respect thereto and no extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding, if any, involving this Amendment; except that any financing statements or other agreements or instruments filed by Bank with respect to Borrower shall remain in full force and effect. This Amendment is a Loan Document.
7. GOVERNING LAW; VENUE. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first written above.
BORROWER: | ||
RADISYS CORPORATION | ||
By: | /s/ Jon Wilson | |
Printed Name: | Jon Wilson | |
Title: | Chief Financial Officer | |
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first written above.
BANK: | ||
SILICON VALLEY BANK | ||
By: | /s/ Jayson Davis | |
Printed Name: | Jayson Davis | |
Title: | Vice President | |
EXHIBIT A
Reaffirmation of Unconditional Secured Guaranty
This Reaffirmation of Unconditional Secured Guaranty is entered into as of February 8, 2016, by the undersigned (the “Guarantor”) in favor of SILICON VALLEY BANK (“SVB”).
WHEREAS, | Guarantor executed and delivered to SVB an Unconditional Secured Guaranty dated as of August 8, 2011 (the “Guaranty”) with respect to the obligations of RadiSys Corporation, an Oregon corporation (“Borrower”), under that certain Loan and Security Agreement dated as of August 7, 2008, by and between Borrower and SVB; |
WHEREAS, | Guarantor executed and delivered to SVB that certain Reaffirmation of Unconditional Secured Guaranty dated as of July 29, 2013 with respect to the obligations of Borrower, under that certain Second Amended and Restated Loan and Security Agreement dated as of July 29, 2013 , by and between Borrower and SVB. |
WHEREAS, | Guarantor executed and delivered to SVB that certain Reaffirmation of Unconditional Secured Guaranty dated as of March 14, 2014 with respect to the obligations of Borrower, under that certain Third Amended and Restated Loan and Security Agreement dated March 14, 2014 (as may be amended, restated, or otherwise modified, the “Loan Agreement”),by and between Borrower and SVB; |
WHEREAS, | Guarantor executed and delivered to SVB that certain Reaffirmation of Unconditional Secured Guaranty dated as of May 30, 2014 with respect to the obligations of Borrower under that certain Amendment No. 1 to Third Amended and Restated Loan and Security Agreement dated as of May 30, 2014; |
WHEREAS, | Guarantor executed and delivered to SVB that certain Reaffirmation of Unconditional Secured Guaranty dated as of April 23, 2015 with respect to the obligations of Borrower under that certain Amendment No. 2 to Third Amended and Restated Loan and Security Agreement dated as of April 23, 2015; and |
WHEREAS, | Borrower and SVB are amending the Loan Agreement pursuant to that certain Amendment No. 3 the Third Amended and Restated Load and Security Agreement dated as of the date hereof (the "Amendment"). |
Now therefore, for valuable consideration, receipt of which is acknowledged, each Guarantor hereby agrees as follows:
1. | Capitalized Terms. Unless otherwise defined in this Reaffirmation of Unconditional Secured Guaranty, all capitalized terms shall have the meaning given to them in the Guaranty or, if not specified there, the Amendment. |
2. | Reaffirmation of Guaranty. Guarantor has reviewed the Amendment. Guarantor hereby ratifies and reaffirms its obligations under the Guaranty and agrees that none of the amendments or modifications to the Third A&R Loan Agreement as set forth in the Amendment, shall impair such Guarantor’s obligations under the Guaranty or SVB’s rights under the Guaranty. |
3. | Continuing Effect and Absence of Defenses. Guarantor acknowledges that the Guaranty is still in full force and effect and that Guarantor has no defenses, other than actual payment of the guaranteed obligations, to enforcement of the Guaranty. Guarantor waives any and all defenses to enforcement of the Guaranty that might otherwise be available as a result of the amendment of the Third A&R Loan Agreement. |
RADISYS INTERNATIONAL LLC, a Delaware | ||
limited liability company formerly known as | ||
CONTINUOUS COMPUTING CORPORATION, a | ||
Delaware corporation | ||
By: | /s/ Jon Wilson | |
Printed Name: | Jon Wilson | |
Title: | Chief Financial Officer | |
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK Date:
FROM:
The undersigned authorized officer of Radisys Corporation (“Borrower”) certifies that under the terms and conditions of the Third Amended and Restated Loan and Security Agreement dated March 14, 2014, between Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with generally GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under “Complies” column. |
Reporting Covenant | Required | Complies | |||
Monthly consolidating financial statements | Monthly within 15 days if Advances or Letters of Credit are outstanding at month-end | Yes No | |||
Monthly cash flow statements evidencing Borrower’s compliance with terms of Section 6.8(b) | Monthly within 15 days | Yes No | |||
Quarterly consolidating financial statements + Compliance Certificate Quarterly and annual financial statement requirement may be met by delivery of 10Q and 10K reports in accordance with the provisions of Section 6.2. Compliance Certificate required with every delivery of a 10Q and 10K. | Quarterly within 45 days | Yes No | |||
Annual financial statement + Compliance Certificate1 | FYE audited within 90 days | Yes No | |||
10Q, 10K and 8K + Compliance Certificate1 | Within 5 days after filing with SEC, but, (i) in case of 10Qs, no later than within 45 days of the last day of the first three fiscal quarter ends of each fiscal year, and (2) in case of 10Ks, no later than 90 days of the last day of each fiscal year | Yes No | |||
Monthly Compliance Certificate showing compliance with covenants | Monthly within 15 days if Advances or Letters of Credit are outstanding at month-end | Yes No | |||
Transaction Report (and schedules attached thereto) | (i) with each request for an Advance, (ii) no later than 5:00 p.m. Pacific time Monday of each week immediately following a week when Liquidity is less than the Liquidity Threshold, and (iii) within twenty (20) days after the end of each month when Liquidity is greater than or equal to the Liquidity Threshold. | Yes No | |||
Material Litigation report | Promptly | Yes* No | |||
Annual board approved financial projections | Annually within 60 days of fiscal year end | Yes No | |||
*If yes, attached is a summary of the Material Litigation not previously disclosed by Borrower or any of its Subsidiaries. | |||||
Financial Covenant | Required | Actual | Complies | ||
Liquidity (tested monthly as of the last Business Day of each month) | Not less than $10,000,000 as of the last Business Day of each month | $______ | Yes No | ||
Minimum Adjusted EBITDA | On a TTM basis as of the last day of each quarter: (i) if either (1) the trailing 3-month average outstanding principal balance or (2) the outstanding principal balance at quarter end, is greater than $15,000,000, then Adjusted EBITDA shall be greater than or equal to $10,000,000; or (ii) if either (1) the trailing 3-month average outstanding principal balance or (2) the outstanding principal balance at quarter end is less than or equal to $15,000,000, then Adjusted EBITDA shall be greater than or equal to $7,500,000. | $______ | Yes No | ||
Pricing - Liquidity Threshold | Actual | Applies | |||
Liquidity Threshold Pricing: If Borrower’s Liquidity is greater than $15,000,000 as of the last Business Day of each month (excluding the last Business Day of the Last month of any fiscal quarter) - Prime Rate plus 75 basis points If Borrower’s Liquidity is greater than $20,000,000 as of the last Business Day of the last month of any fiscal quarter - Prime Rate plus 75 basis points If Borrower’s Liquidity is equal to or less than $15,000,000 as of the last Business Day of each month (excluding the last Business Day of the Last month of any fiscal quarter) - Prime Rate plus 225 basis points If Borrower’s Liquidity is equal to or less than $20,000,000 as of the last Business Day of the last month of any fiscal quarter - Prime Rate plus 225 basis points | $______ | Yes No Yes No Yes No Yes No | |||
The financial covenant analys[is][es] and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate. The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)
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RADISYS CORPORATION | BANK USE ONLY | |
By: | Received by: | |
Name: | AUTHORIZED SIGNER | |
Title: | Date: | |
Verified: | ||
AUTHORIZED SIGNER | ||
Date: | ||
Compliance Status | Yes No | |
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
Dated: ____________________
I. Liquidity (Section 6.9(a)) (Tested Monthly)
Required: | Liquidity of not less than Ten Million Dollars ($10,000,000) as of the last Business Day of each month. |
Actual:
A. | Borrower’s unrestricted cash and Cash Equivalents | $_______ |
B. | the unused portion of the Revolving Line | $_______ |
C. | Sum of lines A through B | $_______ |
Is line C greater than or equal to $10,000,000?
_________ No, not in compliance Yes, in compliance
Exhibit 99.1
NEWS RELEASEFor more information, contact:
Company Contact | Investor Contact | |
Jon Wilson | Brett L. Perry | |
Chief Financial Officer | Shelton Group | |
503-615-1685 | 214-272-0070 | |
RADISYS REPORTS FOURTH QUARTER AND FISCAL 2015 RESULTS
Annual revenue and diluted earnings per share exceed initial guidance
Secured first order for next-generation datacenter infrastructure product targeted at telecom and cable operators
HILLSBORO, OR - February 9, 2016 - Radisys Corporation (NASDAQ: RSYS), the services acceleration company, today announced financial results for the fourth quarter ended December 31, 2015.
Fourth Quarter and Recent Highlights
• | Software-Systems revenue of $15.7 million, representing over 50% year-on-year growth, with gross margin of 61.5%; |
• | Received orders totaling approximately $19 million for the Company’s next-generation datacenter infrastructure product, targeted at telecom and cable operators, from a tier-one North American carrier; and |
• | GAAP loss per share improved $0.08 year-on-year. Non-GAAP earnings were $0.08 per diluted share, an increase of $0.07 per share year-on-year. |
2015 Highlights
• | Software-Systems revenue of $55.0 million, representing over 35% year-on-year growth; |
• | Shipped over $14 million of MediaEngine products in support of a greenfield LTE rollout by a large Asian carrier; |
• | Secured and shipped orders for initial commercial deployment of FlowEngine products with a tier-one North American carrier; |
• | GAAP loss per share improved $0.39 year-on-year. Non-GAAP earnings were $0.21 per diluted share, an increase of $0.37 per share year-on-year; and |
• | Generated $9.7 million of operating income from the Embedded Products segment, compared to $2.5 million in 2014. |
“As highlighted in our January preannouncement, our fourth quarter results are indicative of the strong traction we are making across all of our product lines,” said Brian Bronson, Radisys President and CEO. “For the full year, we shipped over $14 million of MediaEngine product to our large Asian carrier customer, exceeded expectations by delivering over $5 million of FlowEngine products predominately to a tier-one North American carrier and returned CellEngine to revenue growth. These achievements, coupled with strong operating income from our Embedded Products segment, enabled us to exceed our initial guidance for both revenue and earnings in 2015.”
“In addition, we received an initial order from a tier-one North American carrier for our next-generation datacenter product, which Radisys will formally launch to the market in the coming months. This significant opportunity positions us to provide more complete solutions as we enable telecom and cable operators to move from their current network topology to a datacenter environment. Further, I expect over time this product will create significant pull-through of our FlowEngine products, as well as other product and services opportunities. Given the momentum from this new initiative, and coupled with strength in our Software-Systems segment, we expect Radisys to achieve
consolidated top-line revenue growth in 2016 while also incrementally growing earnings as we continue to invest in these growth initiatives to drive long-term sustainable growth.”
Software-Systems Results
For the fourth quarter of 2015, Software-Systems revenue was $15.7 million, compared to $15.5 million in the prior quarter and $10.4 million in the fourth quarter of 2014, representing an increase of over 50% year-on-year. Fourth quarter 2015 revenue included initial FlowEngine shipments in support of the commercial deployment by a tier-one North American carrier, as well as growth from both the MediaEngine and CellEngine product lines.
Gross margins were 61.5%, compared to 58.7% in the prior quarter and 58.3% in the fourth quarter of 2014. The sequential and year-on-year improvements were the result of continued acceleration in product sales.
Operating income for the fourth quarter was $1.2 million, compared to $0.7 million in the prior quarter and a loss of $1.5 million in the fourth quarter of 2014.
Embedded Products Results
For the fourth quarter of 2015, Embedded Products revenue was $28.4 million, compared to $29.3 million in the prior quarter and $37.8 million in the fourth quarter of 2014.
Gross margins were 22.1%, compared to 20.4% in the prior quarter and 26.4% in the fourth quarter of 2014. The year-on-year decline was the result of last time sales of certain products in the fourth quarter of 2014 containing higher than normal gross margins.
Operating income for the fourth quarter was $1.6 million, compared to $1.8 million in the prior quarter and $2.0 million in the fourth quarter of 2014.
Consolidated Results
For the fourth quarter of 2015, consolidated revenue was $44.1 million, compared to $44.8 million in the prior quarter and $48.2 million in the fourth quarter of 2014.
On a GAAP basis, gross margin in the fourth quarter of 2015 was 31.6%, compared to 29.0% in the prior quarter and 29.0% in the fourth quarter of 2014. Fourth quarter 2015 GAAP research and development and selling, general, and administrative expenses were $14.0 million, compared to $13.6 million in the prior quarter and $16.2 million in the fourth quarter of 2014.
On a non-GAAP basis, fourth quarter 2015 gross margin was 36.1%, compared to 33.6% in the prior quarter and 33.3% in the fourth quarter of 2014. Fourth quarter 2015 gross margin improved 250 basis points sequentially due to improved sales mix within the Software-Systems segment. Fourth quarter 2015 research and development and selling, general and administrative expenses on a non-GAAP basis were $13.1 million, compared to $12.5 million in the prior quarter and $15.6 million in the fourth quarter of 2014. The sequential increase is the result of accelerated hiring in support of our Software-Systems growth initiatives coupled with higher variable plan compensation.
For the fourth quarter of 2015, the Company recorded a GAAP net loss of $1.4 million, or $0.04 per share, compared to a GAAP net loss of $2.1 million, or $0.06 per share, in the prior quarter and GAAP net loss of $4.5 million, or $0.12 per share, in the fourth quarter of 2014. On a non-GAAP basis, the Company recorded a profit of $2.8 million, or $0.08 per diluted share, compared to a non-GAAP profit of $2.6 million, or $0.07 per diluted share, in the prior quarter and non-GAAP profit of $0.4 million, or $0.01 per diluted share, in the fourth quarter of 2014.
First Quarter 2016 Financial Guidance
• | Revenue is expected between $49 million to $52 million. This guidance range includes the expected recognition of the approximately $19 million order for next-generation datacenter products. The balance of revenue guidance assumes year-on-year growth in Software-Systems and a greater than seasonal decline in core Embedded Products. |
• | Non-GAAP gross margin is expected between 27% to 30%, and non-GAAP R&D and SG&A expenses are expected to approximate $13 million. |
• | Non-GAAP earnings are expected to range from $0.01 to $0.05 per diluted share. |
Annual 2016 Financial Guidance
• | Revenue is expected between $180 million to $200 million. Software-Systems revenue is expected to grow approximately 10% year-on-year, which represents approximately 20% compound annual growth over 2014, while Embedded Products revenue is expected to grow modestly over 2015. |
• | Non-GAAP gross margin is expected between 33% to 34%, with year-on-year improvement in Software-Systems segment gross margins offset by a reduction in Embedded Products segment gross margins tied to our new telecom datacenter product initiative. |
• | Non-GAAP R&D and SG&A expenses are expected between $51 million and $55 million. |
• | Non-GAAP earnings are expected to range from $0.22 to $0.28 per diluted share. |
Conference Call and Webcast Information
The Company will report full fourth quarter 2015 results on February 9, 2016, after market close 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 # 17237163. 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 February 23, 2016. To access the replay, dial 855-859-2056 or 404-537-3406 and reference conference ID# 17237163. 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’ 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 first quarter and fiscal 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) continued implementation of the Company’s next-generation datacenter product, (b) customer implementation of traffic management solutions, (c) the outcome of product trials, (d) the market success of customers' products and solutions, (e) the development and transition of new products and solutions, (f) the enhancement of existing products and solutions to meet customer needs and respond to emerging technological trends, (g) the Company's dependence on certain customers and high degree of customer concentration, (h) 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, (i) matters affecting the software and embedded product industry, including changes in industry standards, changes in customer requirements and new product introductions, (j) actions by regulatory authorities or other third parties, (k) cash generation, (l) changes in tariff and trade policies and other risks associated with foreign operations, (m) fluctuations in currency exchange rates, (n) the ability of the Company to successfully complete any restructuring, acquisition or divestiture activities, (o) 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 (p) 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, 2014, 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 February 9, 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 life insurance asset. 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 | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenues | $ | 44,077 | $ | 48,174 | $ | 184,593 | $ | 192,742 | |||||||
Cost of sales: | |||||||||||||||
Cost of sales | 28,232 | 32,179 | 124,579 | 132,730 | |||||||||||
Amortization of purchased technology | 1,927 | 2,045 | 7,862 | 8,210 | |||||||||||
Gross margin | 13,918 | 13,950 | 52,152 | 51,802 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 5,911 | 7,474 | 25,529 | 31,958 | |||||||||||
Selling, general and administrative | 8,092 | 8,759 | 30,628 | 35,862 | |||||||||||
Intangible assets amortization | 1,260 | 1,260 | 5,040 | 5,077 | |||||||||||
Restructuring and other charges, net | 178 | 761 | 5,020 | 4,205 | |||||||||||
Loss from operations | (1,523 | ) | (4,304 | ) | (14,065 | ) | (25,300 | ) | |||||||
Interest expense | (98 | ) | (293 | ) | (515 | ) | (1,242 | ) | |||||||
Other income, net | 518 | 654 | 1,644 | 1,453 | |||||||||||
Loss before income tax expense | (1,103 | ) | (3,943 | ) | (12,936 | ) | (25,089 | ) | |||||||
Income tax expense | 337 | 524 | 1,742 | 2,492 | |||||||||||
Net loss | $ | (1,440 | ) | $ | (4,467 | ) | $ | (14,678 | ) | $ | (27,581 | ) | |||
Net loss per share: | |||||||||||||||
Basic | $ | (0.04 | ) | $ | (0.12 | ) | $ | (0.40 | ) | $ | (0.79 | ) | |||
Diluted | $ | (0.04 | ) | $ | (0.12 | ) | $ | (0.40 | ) | $ | (0.79 | ) | |||
Weighted average shares outstanding | |||||||||||||||
Basic | 36,936 | 36,504 | 36,789 | 34,699 | |||||||||||
Diluted | 36,936 | 36,504 | 36,789 | 34,699 | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
December 31, 2015 | December 31, 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 20,764 | $ | 31,242 | |||
Accounts receivable, net | 60,942 | 43,845 | |||||
Deferred cost of sales | 14,113 | 176 | |||||
Inventories and inventory deposit, net | 16,812 | 18,475 | |||||
Other current assets | 14,098 | 9,600 | |||||
Total current assets | 126,729 | 103,338 | |||||
Property and equipment, net | 6,134 | 9,786 | |||||
Intangible assets, net | 30,322 | 43,224 | |||||
Other assets, net | 3,884 | 4,548 | |||||
Total assets | $ | 167,069 | $ | 160,896 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 43,451 | $ | 33,679 | |||
Deferred revenue | 23,062 | 6,380 | |||||
Other accrued liabilities | 16,654 | 12,261 | |||||
Line of credit | 15,000 | 10,000 | |||||
Convertible senior notes | — | 18,000 | |||||
Total current liabilities | 98,167 | 80,320 | |||||
Other long-term liabilities | 2,985 | 2,800 | |||||
Total liabilities | 101,152 | 83,120 | |||||
Shareholders' equity: | |||||||
Common stock | 338,165 | 334,024 | |||||
Accumulated deficit | (271,349 | ) | (256,671 | ) | |||
Accumulated other comprehensive income | (899 | ) | 423 | ||||
Total shareholders’ equity | 65,917 | 77,776 | |||||
Total liabilities and shareholders’ equity | $ | 167,069 | $ | 160,896 | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December, 31 | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net loss | $ | (1,440 | ) | $ | (4,467 | ) | $ | (14,678 | ) | $ | (27,581 | ) | |||
Adjustments to reconcile net loss to net cash | |||||||||||||||
provided by (used in) operating activities: | |||||||||||||||
Depreciation and amortization | 4,422 | 4,883 | 18,478 | 20,240 | |||||||||||
Stock-based compensation expense | 981 | 738 | 3,952 | 4,097 | |||||||||||
Other | 186 | 2,150 | 1,336 | 5,766 | |||||||||||
Changes in operating assets and liabilities: | |||||||||||||||
Accounts receivable | (17,096 | ) | 70 | (17,121 | ) | (2,262 | ) | ||||||||
Inventories and deferred cost of sales | (15,546 | ) | (1,778 | ) | (13,801 | ) | 4,313 | ||||||||
Other receivables | (7,914 | ) | (377 | ) | (5,040 | ) | (3,689 | ) | |||||||
Accounts payable | 15,763 | 1,857 | 9,853 | (1,534 | ) | ||||||||||
Deferred revenue | 15,534 | 80 | 16,682 | (1,875 | ) | ||||||||||
Other operating assets and liabilities | 3,065 | (2,981 | ) | 5,396 | (4,272 | ) | |||||||||
Net cash provided by (used in) operating activities | (2,045 | ) | 175 | 5,057 | (6,797 | ) | |||||||||
Cash flows from investing activities: | |||||||||||||||
Capital expenditures | (571 | ) | (535 | ) | (2,224 | ) | (2,396 | ) | |||||||
Proceeds from sale of assets | — | 200 | — | 200 | |||||||||||
Net cash used in investing activities | (571 | ) | (335 | ) | (2,224 | ) | (2,196 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Borrowings on line of credit | 5,000 | — | 13,500 | — | |||||||||||
Payments on line of credit | — | — | (8,500 | ) | (5,000 | ) | |||||||||
Repayment of convertible senior notes | — | — | (18,000 | ) | — | ||||||||||
Proceeds from issuance of common stock | 81 | 105 | 331 | 21,186 | |||||||||||
Other financing activities, net | (40 | ) | (331 | ) | (142 | ) | (882 | ) | |||||||
Net cash provided by (used in) financing activities | 5,041 | (226 | ) | (12,811 | ) | 15,304 | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (37 | ) | (310 | ) | (500 | ) | (551 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | 2,388 | (696 | ) | (10,478 | ) | 5,760 | |||||||||
Cash and cash equivalents, beginning of period | 18,376 | 31,938 | 31,242 | 25,482 | |||||||||||
Cash and cash equivalents, end of period | $ | 20,764 | $ | 31,242 | $ | 20,764 | $ | 31,242 | |||||||
REVENUES, GROSS MARGIN AND INCOME (LOSS) FROM OPERATIONS BY OPERATING SEGMENT
(In thousands, unaudited)
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue | ||||||||||||||||
Software-Systems | $ | 15,670 | $ | 10,420 | $ | 55,006 | $ | 40,281 | ||||||||
Embedded Products and Hardware Services | 28,407 | 37,754 | 129,587 | 152,461 | ||||||||||||
Total revenues | $ | 44,077 | $ | 48,174 | $ | 184,593 | $ | 192,742 | ||||||||
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Gross margin | ||||||||||||||||
Software-Systems | $ | 9,643 | $ | 6,078 | $ | 31,997 | $ | 24,949 | ||||||||
Embedded Products and Hardware Services | 6,268 | 9,977 | 28,311 | 35,449 | ||||||||||||
Corporate and other | (1,993 | ) | (2,105 | ) | (8,156 | ) | (8,596 | ) | ||||||||
Total gross margin | $ | 13,918 | $ | 13,950 | $ | 52,152 | $ | 51,802 | ||||||||
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Income (loss) from operations | ||||||||||||||||
Software-Systems | $ | 1,226 | $ | (1,470 | ) | $ | (1,900 | ) | $ | (6,169 | ) | |||||
Embedded Products and Hardware Services | 1,597 | 1,969 | 9,709 | 2,457 | ||||||||||||
Corporate and other | (4,346 | ) | (4,803 | ) | (21,874 | ) | (21,588 | ) | ||||||||
Total loss from operations | $ | (1,523 | ) | $ | (4,304 | ) | $ | (14,065 | ) | $ | (25,300 | ) | ||||
REVENUES BY GEOGRAPHY
(In thousands, unaudited)
Three Months Ended | Year Ended | ||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||
North America | $ | 24,094 | 54.6 | % | $ | 22,545 | 46.8 | % | $ | 82,564 | 44.7 | % | $ | 76,709 | 39.8 | % | |||||||
Asia Pacific | 12,639 | 28.7 | 18,754 | 38.9 | 70,655 | 38.3 | 73,152 | 38.0 | |||||||||||||||
Europe, the Middle East and Africa | 7,344 | 16.7 | 6,875 | 14.3 | 31,374 | 17.0 | 42,881 | 22.2 | |||||||||||||||
Total | $ | 44,077 | 100.0 | % | $ | 48,174 | 100.0 | % | $ | 184,593 | 100.0 | % | $ | 192,742 | 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 | Year Ended | ||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||
GROSS MARGIN: | |||||||||||||||||||||||
GAAP gross margin | $ | 13,918 | 31.6 | % | $ | 13,950 | 29.0 | % | $ | 52,152 | 28.3 | % | $ | 51,802 | 26.9 | % | |||||||
(a) Amortization of acquired intangible assets | 1,927 | 2,045 | 7,862 | 8,210 | |||||||||||||||||||
(b) Stock-based compensation | 66 | 60 | 294 | 386 | |||||||||||||||||||
Non-GAAP gross margin | $ | 15,911 | 36.1 | % | $ | 16,055 | 33.3 | % | $ | 60,308 | 32.7 | % | $ | 60,398 | 31.3 | % | |||||||
RESEARCH AND DEVELOPMENT: | |||||||||||||||||||||||
GAAP research and development | $ | 5,911 | 13.4 | % | $ | 7,474 | 15.5 | % | $ | 25,529 | 13.8 | % | $ | 31,958 | 16.6 | % | |||||||
(b) Stock-based compensation | 227 | 135 | 868 | 818 | |||||||||||||||||||
Non-GAAP research and development | $ | 5,684 | 12.9 | % | $ | 7,339 | 15.2 | % | $ | 24,661 | 13.4 | % | $ | 31,140 | 16.2 | % | |||||||
SELLING, GENERAL AND ADMINISTRATIVE: | |||||||||||||||||||||||
GAAP selling, general and administrative | $ | 8,092 | 18.4 | % | $ | 8,759 | 18.2 | % | $ | 30,628 | 16.6 | % | $ | 35,862 | 18.6 | % | |||||||
(b) Stock-based compensation | 689 | 543 | 2,791 | 2,893 | |||||||||||||||||||
Non-GAAP selling, general and administrative | $ | 7,403 | 16.8 | % | $ | 8,216 | 17.1 | % | $ | 27,837 | 15.1 | % | $ | 32,969 | 17.1 | % | |||||||
INCOME (LOSS) FROM OPERATIONS: | |||||||||||||||||||||||
GAAP loss from operations | $ | (1,523 | ) | (3.5 | )% | $ | (4,304 | ) | (8.9 | )% | $ | (14,065 | ) | (7.6 | )% | $ | (25,300 | ) | (13.1 | )% | |||
(a) Amortization of acquired intangible assets | 3,187 | 3,304 | 12,902 | 13,286 | |||||||||||||||||||
(b) Stock-based compensation | 981 | 738 | 3,952 | 4,097 | |||||||||||||||||||
(c) Restructuring and acquisition-related charges, net | 178 | 761 | 5,020 | 4,205 | |||||||||||||||||||
Non-GAAP income (loss) from operations | $ | 2,823 | 6.4 | % | $ | 499 | 1.0 | % | $ | 7,809 | 4.2 | % | $ | (3,712 | ) | (1.9 | )% | ||||||
NET INCOME (LOSS): | |||||||||||||||||||||||
GAAP net loss | $ | (1,440 | ) | (3.3 | )% | $ | (4,467 | ) | (9.3 | )% | $ | (14,678 | ) | (8.0 | )% | $ | (27,581 | ) | (14.3 | )% | |||
(a) Amortization of acquired intangible assets | 3,187 | 3,304 | 12,902 | 13,286 | |||||||||||||||||||
(b) Stock-based compensation | 981 | 738 | 3,952 | 4,097 | |||||||||||||||||||
(c) Restructuring and acquisition-related charges, net | 178 | 761 | 5,020 | 4,205 | |||||||||||||||||||
(d) Income taxes | (72 | ) | 73 | 562 | 762 | ||||||||||||||||||
(e) Gain on Life Insurance asset | — | — | — | (361 | ) | ||||||||||||||||||
Non-GAAP net income (loss) | $ | 2,834 | 6.4 | % | $ | 409 | 0.8 | % | $ | 7,758 | 4.2 | % | $ | (5,592 | ) | (2.9 | )% | ||||||
GAAP weighted average diluted shares | 36,936 | 36,504 | 36,789 | 34,699 | |||||||||||||||||||
Dilutive equity awards included in | |||||||||||||||||||||||
non-GAAP earnings per share | 137 | 270 | 151 | — | |||||||||||||||||||
Non-GAAP weighted average diluted shares | 37,073 | 36,774 | 36,940 | 34,699 | |||||||||||||||||||
GAAP net loss per share (diluted) | $ | (0.04 | ) | $ | (0.12 | ) | $ | (0.40 | ) | $ | (0.79 | ) | |||||||||||
Non-GAAP adjustments detailed above | 0.12 | 0.13 | 0.61 | 0.63 | |||||||||||||||||||
Non-GAAP net income (loss) per share (diluted) | $ | 0.08 | $ | 0.01 | $ | 0.21 | $ | (0.16 | ) | ||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE
NET INCOME (LOSS) PER SHARE
(In millions, except per share amounts, unaudited)
Three Months Ended | For the year Ended | |||||||||||||||
March 31, 2016 | December 31, 2016 | |||||||||||||||
Low End | High End | Low End | High End | |||||||||||||
GAAP net loss | (5.1 | ) | (3.3 | ) | (10.6 | ) | (9.0 | ) | ||||||||
(a) Amortization of acquired intangible assets | 3.2 | 3.2 | 12.7 | 12.7 | ||||||||||||
(b) Stock-based compensation | 1.0 | 1.2 | 4.0 | 5.0 | ||||||||||||
(c) Restructuring and acquisition-related charges, net | 1.0 | 0.5 | 1.5 | 0.8 | ||||||||||||
(d) Income taxes | 0.2 | 0.4 | 0.8 | 1.2 | ||||||||||||
Total adjustments | 5.4 | 5.3 | 19.0 | 19.7 | ||||||||||||
Non-GAAP net income | $ | 0.3 | $ | 2.0 | $ | 8.4 | $ | 10.7 | ||||||||
GAAP weighted average shares | 37,000 | 37,000 | 37,600 | 37,600 | ||||||||||||
Non-GAAP adjustments | 300 | 300 | 300 | 900 | ||||||||||||
Non-GAAP weighted average shares (diluted) | 37,300 | 37,300 | 37,900 | 38,500 | ||||||||||||
GAAP net loss per share | (0.14 | ) | (0.09 | ) | (0.28 | ) | (0.24 | ) | ||||||||
Non-GAAP adjustments detailed above | 0.15 | 0.14 | 0.50 | 0.52 | ||||||||||||
Non-GAAP net income per share (diluted) | $ | 0.01 | $ | 0.05 | $ | 0.22 | $ | 0.28 | ||||||||
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE
GROSS MARGIN
(unaudited)
Estimates at the midpoint of the guidance range | |||||
Three Months Ended | For the Year Ended | ||||
March 31, 2016 | December 31, 2016 | ||||
GAAP | 24.5 | % | 29.2 | % | |
(a) Amortization of acquired intangible assets | 3.8 | 4.1 | |||
(b) Stock-based compensation | 0.2 | 0.2 | |||
Non-GAAP | 28.5 | % | 33.5 | % | |
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE
RESEARCH AND DEVELOPMENT EXPENSE AND
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
(In millions, unaudited)
Estimates at the midpoint of the guidance range | |||||||
Three Months Ended | For the Year Ended | ||||||
March 31, 2016 | December 31, 2016 | ||||||
GAAP | $ | 14.0 | $ | 57.0 | |||
(b) Stock-based compensation | 1.0 | 4.0 | |||||
Non-GAAP | $ | 13.0 | $ | 53.0 | |||
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 life insurance asset: Includes a death benefit received from life insurance assets which were a component of the Company's deferred compensation plan. This transaction is not part of the Company's ordinary course of business and therefore has been excluded from its non-GAAP financial measures because it enhances the ability of investors to compare the Company's period-over-period operating results.