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Sonus Networks Announces Preliminary Third Quarter 2017 Financial ResultsWESTFORD, Mass., Oct. 13, 2017 /PRNewswire/ -- Sonus Networks, Inc. (Nasdaq: SONS), a global leader in secure and intelligent cloud communications, today announced preliminary results for the third quarter ended September 30, 2017. Financial Highlights – Sonus-only
1 Please see the reconciliation of non-GAAP and GAAP financial measures in the appendix. The following tables summarize select Sonus consolidated historical quarterly results (in millions except percentages and per share data):
1 Please see the reconciliation of non-GAAP and GAAP financial measures in the appendix. Cash and investments were $131.6 million at the end of the third quarter of 2017, compared to $125.9 million at the end of the second quarter of 2017. The Company had two customers that contributed 10% or more of total revenue in the third quarter of 2017: Verizon, which contributed approximately 16% of revenue, and AT&T, which contributed approximately 11% of revenue. The preliminary results are based upon currently available information and Sonus' management's preliminary analysis of the financial results for the quarter ended September 30, 2017. These preliminary estimates have been prepared by, and are the responsibility of, Sonus management. Sonus' independent registered public accounting firm, Deloitte & Touche LLP, has not audited or reviewed, and does not express an opinion with respect to, these Q3 2017 preliminary financial results. This summary is not a comprehensive statement of Sonus' financial results for the three months ended September 30, 2017. Actual results may differ from these estimates due to the completion of Sonus' quarterly closing procedures, final adjustments and other developments that may arise between now and the time the financial results for this period are finalized. The Company expects to complete its closing procedures with respect to the three months ended September 30, 2017 and to file its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 no later than October 27, 2017. "I'm very pleased to report that Sonus delivered another solid quarter, including the satisfaction of major milestones for a large competitive displacement in North America. Sonus' gross margin was particularly strong in Q3 as we continue to evolve to software solutions based on many years of investment in network virtualization," said Raymond Dolan, Sonus president and chief executive officer. Dolan continued, "As we approach the closing of our merger with GENBAND, which remains subject to shareholder approval, we remain committed to attaining the $40 to $50 million of annual cost savings anticipated when we announced our plans in May. Also, the feedback that we've received from customers has been extremely positive. Our combined product offerings will make us more strategic to many customers, and our scale will allow us to invest even more in key areas as both service providers and enterprises migrate to fully-virtualized, cloud architectures." The following table summarizes select consolidated Sonus-only outlook for the full year 2017, as well as select consolidated full year financial results for fiscal 2016. Taking into account the preliminary results reported above, including the timing nature of some of the additional revenue recognized in the third quarter, Sonus continues to expect full year results in line with the upper end of the guidance it originally provided on August 3, 2017. That guidance is presented in the table below, alongside actual results for the year ended December 31, 2016.
1 Please see the reconciliation of non-GAAP and GAAP financial measures in the press release appendix. Financial Highlights – GENBAND-only
The preliminary results and outlook for GENBAND are based upon currently available information and GENBAND's management's preliminary analysis. GENBAND's independent registered public accounting firm has not audited or reviewed, and does not express an opinion with respect to, the foregoing information. Actual results may differ from these estimates. Conference Call Details Conference call details: Replay information: Sonus/GENBAND Merger - Special Meeting of Stockholders
Additional Resources related to the potential merger of Sonus/GENBAND
About Sonus Networks About GENBAND IMPORTANT ADDITIONAL INFORMATION ABOUT THE TRANSACTION HAS BEEN FILED WITH THE SEC Sonus, NewCo, the GENBAND Parties and certain of their respective directors and executive officers, under the SEC's rules, may be deemed to be participants in the solicitation of proxies of Sonus stockholders in connection with the proposed transaction. Information about the directors and executive officers of Sonus and their ownership of Sonus common stock and the GENBAND Parties and their ownership of equity in the applicable GENBAND Party is set forth in the joint proxy statement/prospectus. NO OFFERS OR SOLICITATIONS Important Information Regarding Forward-Looking Statements Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, adjustments identified in the course of the Company's quarter-end and accounting review; the timing and impact of our proposed transaction with GENBAND; the timing of customer purchasing decisions and our recognition of revenues; economic conditions; our ability to recruit and retain key personnel; difficulties supporting our strategic focus on channel sales; difficulties retaining and expanding our customer base; difficulties leveraging market opportunities; the impact of restructuring and cost-containment activities; our ability to realize benefits from the acquisitions that we have completed; the effects of disruption from the acquisitions that we have completed, making it more difficult to maintain relationships with employees, customers, business partners or government entities; the success implementing the integration strategies with respect to acquisitions; litigation; actions taken by significant stockholders; difficulties providing solutions that meet the needs of customers; market acceptance of our products and services; rapid technological and market change; our ability to protect our intellectual property rights; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; higher risks in international operations and markets; the impact of increased competition; currency fluctuations; changes in the market price of our common stock; and/or failure or circumvention of our controls and procedures. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. GENBAND management's forward-looking statements are based on their current expectations and assumptions regarding GENBAND's business, the economy and future conditions, and such forward-looking statements are subject to the same factors described above, which factors could cause GENBAND's actual results to differ materially from those anticipated in those forward-looking statements. This release also contains statements about our agreement to effect a strategic combination with GENBAND resulting in a new combined company (collectively, the "Transaction"). Many risks and uncertainties could cause actual results to differ materially from these forward-looking statements with respect to the Transaction, and these risks, as well as other risks associated with the proposed merger, are more fully disclosed in the joint proxy statement/prospectus that is included in the registration statement on Form S-4 (File No. 333-219008) that was filed with the SEC in connection with the proposed merger. We caution you against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in these forward-looking statements are discussed in Part II, Item 1A. "Risk Factors", Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part I, Item 3 "Quantitative and Qualitative Disclosures About Market Risk" in the Company's most recent Quarterly Report on Form 10-Q. Any forward-looking statement made by us in this release speaks only as of the date of this release. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be 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. Discussion of Non-GAAP Financial Measures Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to Sonus' financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future. Stock-based compensation is different from other forms of compensation, as it is a non-cash expense. For example, a cash salary generally has a fixed and unvarying cash cost. In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to us is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time. We believe that excluding non-cash stock-based compensation expense from our operating results facilitates the comparison of our financial statements to our historical operating results and to other companies in our industry. We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures. These amortization amounts are inconsistent in frequency and amount and are significantly impacted by the timing and size of acquisitions. Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that intangible assets contribute to revenue generation. We believe that excluding the non-cash amortization of intangible assets facilitates the comparison of our financial results to our historical operating results and to other companies in our industry as if the acquired intangible assets had been developed internally rather than acquired. We consider certain merger integration costs to be unpredictable and dependent a significant number of factors that may be outside of our control. We do not consider these merger integration costs to be related to the continuing operations of the combined business or the Company. In addition, the size, complexity and/or volume of an acquisition, which often drives the magnitude of merger integration costs, may not be indicative of such future costs. We believe that excluding merger integration costs facilitates the comparison of our financial results to our historical operating results and to other companies in our industry. In September 2017, we recorded $1.6 million of expense related to potential fines in connection with the ongoing SEC investigation. In June 2016, we recorded $0.6 million of patent litigation settlement costs. This amount is included as a component of General and administrative expense; however, we believe that such patent litigation settlement costs are not part of our core business or ongoing operations. Accordingly, we believe that excluding this patent litigation settlement expense facilitates the comparison of our financial results to our historical operating results and to other companies in our industry. We consider certain acquisition-related costs to be unpredictable and dependent on a significant number of factors that may be outside of our control. We do not consider these acquisition-related costs to be related to the continuing operations of the acquired business or the Company. In addition, the size, complexity and/or volume of an acquisition, which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs. We believe that excluding acquisition-related costs facilitates the comparison of our financial results to our historical operating results and to other companies in our industry. We have recorded restructuring expense to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing our worldwide workforce. We review our restructuring accruals regularly and record adjustments (both expense and credits) to these estimates as required. We believe that excluding restructuring expense and credits facilitates the comparison of our financial results to our historical operating results and to other companies in our industry, as there are no future revenue streams or other benefits associated with these costs. In May 2017, we sold a block of IP addresses that we had acquired in connection with our acquisition of Network Equipment Technologies, Inc. ("NET") and recognized a gain, net of commission and fees, of $0.6 million. In July 2016, we sold the NET domain name to a third party and recognized a gain, net of commission and fees, of $0.8 million, and in December 2016, we sold a block of IP addresses which we had acquired in connection with our acquisition of Performance Technologies Inc. and recognized a gain, net of commission and fees, of $0.5 million. These amounts are included as components of Other income, net, in the respective fiscal years. We believe that such gains are not part of our core business or ongoing operations. Accordingly, we believe that excluding the other income arising from these sales facilitates the comparison of our financial results to our historical results and to other companies in our industry. We anticipate that we will reverse $2.0 million of deferred tax assets related to net operating loss carryforwards for our subsidiary in Canada based on positive earnings evidence in the subsidiary over a consecutive three-year period. This adjustment will result in an income tax credit and reduce our provision in the reversal period. We believe that such adjustments are not part of our core business or ongoing operations. Accordingly, we believe that excluding the income tax credit arising from the reversal of the deferred tax assets facilitates the comparison of our financial results to our historical results and to other companies in our industry. We believe that providing non-GAAP information to investors, in addition to the GAAP presentation, will allow investors to view the financial results in the way management views the operating results. We further believe that providing this information helps investors to better understand our financial performance and evaluate the efficacy of the methodology and information used by our management to evaluate and measure such performance.
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