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Radisys Reports Fourth Quarter and Fiscal 2015 ResultsRadisys Corporation (NASDAQ: RSYS), the services acceleration company, today announced financial results for the fourth quarter ended December 31, 2015. Fourth Quarter and Recent Highlights
2015 Highlights
"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
Annual 2016 Financial Guidance
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
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.
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