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TMCNet:  Dialogic Inc. Reports Second Quarter 2014 Financial Results

[August 14, 2014]

Dialogic Inc. Reports Second Quarter 2014 Financial Results

PARSIPPANY, N.J. --(Business Wire)--

Dialogic Inc. (OTCQB:DLGC), the Network Fuel® company, today announced second quarter results for the period ending June 30, 2014.

GAAP Results

Total Revenue for the second quarter of 2014 was $31.5 million compared to $28.4 million in the first quarter of 2014 and $31.1 million in the second quarter of 2013. For the second quarter of 2014, there was an increase in total revenue of $1.6 million that was attributable to a revision of the application of our revenue recognition practice as a result of establishing a track record of successful installations related to our ControlSwitch products, whereby revenue is recognized based upon delivery rather than customer acceptance. Gross Margin for the second quarter of 2014 was 61.8% compared to 62.4% in the first quarter of 2014 and 57.6% in the second quarter of 2013. Operating Expense for the second quarter of 2014 was $18.1 million compared to $19.9 million in the first quarter of 2014 and $23.2 million in the second quarter of 2013. Net Loss for the second quarter of 2014 was $2.3 million, or $0.14 per share compared to $5.2 million, or $0.32 per share, in the first quarter of 2014 and $5.7 million, or $0.36 per share, in the second quarter of 2013. Cash on hand for the second quarter of 2014 was $6.5 million compared to $4.1 million in the first quarter of 2014 and $8.4 million in the second quarter of 2013.

Non-GAAP Results

Total Revenue for the second quarter of 2014 was $31.5 million compared to $28.4 million in the first quarter of 2014 and $31.3 million in the second quarter of 2013. For the second quarter of 2014, there was an increase in total revenue of $1.6 million that was attributable to a revision of the application of our revenue recognition practice as a result of establishing a track record of successful installations related to our ControlSwitch products, whereby revenue is recognized based upon delivery rather than customer acceptance. Gross Margin for the second quarter of 2014 was 65.2% compared to 66.2% in the first quarter of 2014 and 61.8% in the second quarter of 2013. Operating Expense for the second quarter of 2014 was $16.2 million compared to $18.5 million in the first quarter of 2014 and $20.6 million in the second quarter of 2013. Adjusted EBITDA for the second quarter of 2014 was $4.3 million compared to $0.3 million in the first quarter of 2014 and ($1.2) million in the second quarter of 2013.

About Dialogic:

Dialogic (OTCQB:DLGC), the Network Fuel® company, inspires the world's leading service providers and application developers to elevate the performance of media-rich communications across the most advanced networks. We boost the reliability of any-to-any network connections, supercharge the impact of applications and amplify the capacity of congested networks. Forty-eight of the world's top 50 mobile operators and nearly 3,000 application developers rely on Dialogic to redefine the possible and exceed user expectations.

For more information on Dialogic and the communications solutions energized by our technology, visit www.dialogic.com and www.dialogic.com/en/showcase. Also, visit our social media newsroom for the latest news, videos and blog posts.

This press release may contain forward-looking statements regarding future events that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. These forward-looking statements involve risks and uncertainties, as well as assumptions that if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to our ability to continue to achieve operational, organizational and financial savings through initiatives already in process or which may be put in process, generate positive cash flow and support continued revenue growth, the potential market for and market acceptance of our products, industry and competitive market conditions, gross margin expansion, creating new revenue opportunities, reducing operating expenses and other risks and uncertainties described more fully in our documents filed with or furnished to the SEC. More information about these and other risks that may impact Dialogic's business is set forth in the "Risk Factors" section in our Quarterly Report on Form 10-Q for the three months ended March 31, 2014, as filed with the SEC. These filings are available on a website maintained by the SEC http://www.sec.gov/. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

Dialogic and Network Fuel are registered trademarks of Dialogic Inc. or a subsidiary. (DLGC-IR)

GAAP Financial Tables




 
Dialogic Inc.
Consolidated Statements of Operations (GAAP)
(In thousands, except per share data)
 
   

Three Months Ended June 30,

    Six Months Ended June 30,
2014     2013     2014     2013
Revenue:            
Products $ 21,161 $ 22,751 $ 40,769 $ 47,484
Services   10,293         8,324         19,120         17,386  
Total revenue   31,454         31,075         59,889         64,870  
 
Cost of revenue:
Products 7,101 8,868 13,838 18,445
Services   4,914         4,303         8,882         8,944  
Total cost of revenue   12,015         13,171         22,720         27,389  
Gross profit   19,439         17,904         37,169         37,481  
 
Operating expenses:
Research and development, net 4,935 7,083 10,679 15,116
Sales and marketing 6,976 8,356 14,764 17,604
General and administrative 6,082 7,629 12,469 15,589
Restructuring charges, net   81         114         77         326  
Total operating expenses   18,074         23,182         37,989         48,635  
Income (loss) from operations 1,365 (5,278 ) (820 ) (11,154 )
 
Other income (expense):

Interest income and other income, net

(50 ) (13 ) (75 ) (53 )
Interest expense (2,787 ) (2,532 ) (5,502 ) (4,899 )
Change in fair value of warrants (621 ) 2,479

(1,053

) 1,273

Foreign exchange gain (loss), net

  54         (550 )      

43

        (911 )
Total other expense, net   (3,404 )       (616 )       (6,587 )       (4,590 )
Loss before provision (benefit) for income taxes (2,039 ) (5,894 ) (7,407 ) (15,744 )
Income tax provision (benefit)   305         (207 )       184         303  
Net loss $ (2,344 )     $ (5,687 )     $ (7,591 )     $ (16,047 )
 
Net loss per share - basic and diluted $ (0.14 ) $ (0.36 ) $ (0.47 ) $ (1.03 )
Weighted average shares of common stock used in
calculation of net loss per share - basic and diluted   16,257         15,907         16,243         15,590  
 
 
Dialogic Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)
      June 30,     December 31,
2014     2013
 
ASSETS
Current assets:
Cash and cash equivalents $ 6,488 $ 4,508
Restricted cash 575 1,180
Accounts receivable, net of allowance of $3,179 and $3,019, respectively 22,344 24,472
Inventory 5,041 5,799
Other current assets   5,284         7,240  
Total current assets 39,732 43,199
Property and equipment, net 3,216 3,775
Intangible assets, net 7,755 10,287
Goodwill 8,282 8,282
Other assets   1,587         1,181  
Total assets $ 60,572       $ 66,724  
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 6,195 $ 7,781
Accrued liabilities 14,775 17,808
Deferred revenue, current portion 14,791 13,094
Bank indebtedness 10,424 12,080
Debt, related parties, net of discount 80,640 -
Capital lease obligations, current portion 67 -
Income taxes payable   861         863  
Total current liabilities 127,753 51,626
Long-term debt, related parties, net of discount - 75,513
Warrants 1,216 163
Other long-term liabilities   5,773         6,419  
Total liabilities 134,742 133,721
Commitments and contingencies
Preferred stock, $0.001 par value:
Authorized - 10,000,000 shares; Issued and outstanding - 1 share - -
Stockholders' deficit:
Common stock, $0.001 par value:
Authorized - 200,000,000 shares; Issued and outstanding 16,261,711 and 16,239,315 shares, respectively 16 16
Additional paid-in capital 264,017 263,354
Accumulated other comprehensive loss (22,326 ) (22,081 )
Accumulated deficit   (315,877 )       (308,286 )
Total stockholders' deficit   (74,170 )       (66,997 )
Total liabilities and stockholders' deficit $ 60,572       $ 66,724  
 

Use of Non-GAAP Financial Measures

Some of the measures in this press release are non-GAAP financial measures within the meaning of the SEC Regulation G. Dialogic believes that presenting non-GAAP Adjusted EBITDA is useful to investors, because it reflects the operating performance of Dialogic. Dialogic management uses these non-GAAP measures as important indicators of the company's past performance and in planning and forecasting performance in future periods. Dialogic considers EBITDA, as adjusted, an important measure of its ability to generate cash flows to fund operating activities, service debt, fund capital expenditures and fund other corporate investing and financing activities. EBITDA, as adjusted, eliminates the non-cash effect of tangible asset depreciation and amortization of intangible assets and stock-based compensation, as well as certain nonrecurring items. EBITDA should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities. The non-GAAP financial information Dialogic presents may not be comparable to similarly-titled financial measures used by other companies, and investors should not consider non-GAAP financial measures in isolation from, or in substitution for, financial information presented in compliance with GAAP. You are encouraged to review the reconciliation of GAAP financial measures to non-GAAP financial measures included elsewhere in this press release.

In respect of the foregoing, Dialogic provides the following supplemental information to provide additional context for the use and consideration of the non-GAAP financial measures used elsewhere in this press release:

"EBITDA" is defined as earnings before interest, income taxes, depreciation and amortization. "Adjusted EBITDA" is defined as EBITDA, plus adjustments for nonrecurring items or other adjustments. Adjusted EBITDA includes EBITDA but excludes restructuring and integration costs, product rationalization, non-cash stock compensation expense, purchase accounting adjustments, SEC inquiry expenses and other non-recurring transactions such as revenue reversals and bad debt charges, as well as other income (expense) items which include the change in the fair value of warrants and foreign exchange gain (loss). Dialogic considers Adjusted EBITDA as a key metric in evaluating its financial performance.

Non-GAAP Financial Tables

 
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended June 30, 2014
(in thousands, except per share data)
(unaudited)
                   
GAAP  

Depreciation and
Amortization

 

Restructuring and
Integration Costs

 

Product
Rationalization

 

Stock-based
Compensation
Expense

 

Purchase
Accounting
Adjustments

 

SEC Inquiry

  Other Adjustments   Adjusted EBITDA
Revenue:
Products $ 21,161 - - - - - - - $ 21,161
Services 10,293 - - - - - - - 10,293
 
Cost of revenue:
Products 7,101 (1,070) - - (14) - - - 6,017
Services 4,914 - - - - - - - 4,914
 
Operating expenses:
Research and development, net 4,935 (118) - - (11) - - - 4,806
Sales and marketing 6,976 (263) (35) - 9 - - - 6,687
General and administrative 6,082 (432) (400) - (232) - (64) (253) 4,701
Restructuring charges, net 81 - (81) - - - - -
 
Total other expense, net (3,404) - - - - - - 3,404 -
Income tax provision 305   -   -   -   -   -   -   (305)   -
Net (loss) income $ (2,344)   1,883   516   -   248   -   64   3,962   $ 4,329
 
Net (loss) income per share - basic and diluted $ (0.14) $ 0.27
Weighted average shares of common stock used in
calculation of net (loss) income per share - basic and diluted 16,257 16,257
 
 
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended March 31, 2014
(in thousands, except per share data)
(unaudited)
                   
GAAP  

Depreciation and
Amortization

 

Restructuring and
Integration Costs

 

Product
Rationalization

 

Stock-based
Compensation
Expense

 

Purchase
Accounting
Adjustments

  SEC Inquiry   Other Adjustments   Non-GAAP
Revenue:
Products $ 19,608 - - - - - - - $ 19,608
Services 8,827 - - - - - - - 8,827
 
Cost of revenue:
Products 6,737 (1,066) - - (15) - - - 5,656
Services 3,968 - - - - - - - 3,968
 
Operating expenses:
Research and development, net 5,744 (148) - (18) - - - 5,578
Sales and marketing 7,788 (265) - (57) - - - 7,466
General and administrative 6,387 (491) (63) - (329) - (49) - 5,455
Restructuring charges, net (4) 4 - - - - - -
 
Total other expense, net (3,183) - - - - - - 3,183 -
Income tax benefit (121)   -   -   -   -   -   -   121   -
Net (loss) income $ (5,247)   1,970   59   -   419   -   49   3,062   $ 312
 
Net (loss) income per share - basic and diluted $ (0.32) $ 0.02
Weighted average shares of common stock used in
calculation of net (loss) income per share - basic and diluted 16,241 16,241
 
 
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended June 30, 2013
(in thousands, except per share data)
(unaudited)
 
    GAAP  

Depreciation and
Amortization

 

Restructuring and
Integration Costs

 

Product
Rationalization

 

Stock-based
Compensation
Expense

 

Purchase
Accounting
Adjustments

  SEC Inquiry   Other Adjustments   Non-GAAP
Revenue:                
Products $ 22,751 - - - - 92 - - $ 22,843
Services 8,324 - - - - 131 - - 8,455
 
Cost of revenue:
Products 8,868 (1,167) - - (40) - - - 7,661
Services 4,303 - - - - - - - 4,303
 
Operating expenses:
Research and development, net 7,083 (265) - - (53) - - - 6,765
Sales and marketing 8,356 (373) - - (120) - - - 7,863
General and administrative 7,629 (484) (558) - (448) - 28 (216) 5,951
Restructuring charges, net 114 - (114) - - - - - -
 
Total other expense, net (616) - - - - - - 616 -
Income tax benefit (207)   -   -   -   -   -   -   207   -
Net loss $ (5,687)   2,289   672   -   661   223   (28)   625   $ (1,245)
 
Net loss per share - basic and diluted $ (0.36) $ (0.08)
Weighted average shares of common stock used in
calculation of net loss per share - basic and diluted 15,907 15,907
 


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