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Press Release -- February 20th, 2014
Source: Sonus Networks
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Sonus Networks Reports 2013 Fourth Quarter and Full Year Results

Delivers Record SBC Revenue for Fourth Quarter and Full Year

WESTFORD, Mass.-- Sonus Networks, Inc. (NASDAQ:SONS, news, filings), a global leader in SIP-based communications, today announced results for the fourth quarter and full year ended December 31, 2013.

Fourth Quarter 2013 Highlights

  • Total revenue was $76.2 million, up 1% compared to the fourth quarter of 2012.
  • Total SBC revenue (including product, maintenance and services) was $41.6 million, reflecting growth of 59% compared to the fourth quarter of 2012.
    • Represented 55% of total Company revenue and marks the first time total SBC revenue has represented more than half of the Company’s total revenue in any quarter.
  • SBC product revenue was $32.2 million, reflecting growth of 56% compared to fourth quarter of 2012.
    • Represented 70% of total product revenue, a record high for the Company.
  • GAAP gross margins were 63.5%; non-GAAP gross margins were 64.7% representing an increase of 570 basis points compared to non-GAAP gross margins in the fourth quarter of 2012.
  • GAAP earnings per share was breakeven; non-GAAP diluted earnings per share was $0.02.

Full Year 2013 Highlights

  • Total revenue was $276.7 million, up 9% compared to full year 2012.
  • Total SBC revenue (including product, maintenance and services) was $129.9 million, reflecting growth of 48% over 2012.
    • Represented 47% of total Company revenue.
  • SBC product revenue was $97.4 million, reflecting growth of 44% over 2012.
    • Represented 58% of total product revenue and marks the first time SBC product revenue has represented more than half of the Company’s total product revenue for the full year.
  • Enterprise sales contributed 27% of total product revenue.
  • Channel sales contributed 20% of total product revenue.
  • GAAP gross margins were 62.3%; non-GAAP gross margins were 63.6%, representing an increase of 360 basis points compared to non-GAAP gross margins in 2012.
  • GAAP loss per share was $0.08; non-GAAP diluted earnings per share was $0.02.
  • Announced stock buyback program to repurchase up to $100 million of the Company’s common stock; executed approximately $59.3 million through December 31, 2013.
  • Announced industry’s first full-featured, unlimited scale software-based SBC.
  • Successfully integrated the acquisition of Network Equipment Technologies, Inc. (NET), extending the Company’s SBC product portfolio into the enterprise.
  • Announced the acquisition of Performance Technologies, Inc. (PT) in December 2013; announced the successful closing of the transaction in February 2014.
    • Acquisition expected to strengthen the Company’s mobility and virtualization strategies.
  • Added several prominent leaders to the Company’s Board of Directors and management team.

Quotes

“2013 was an unprecedented year of transformation for Sonus,” said Ray Dolan, president and chief executive officer. “We had record SBC results whereby SBC product revenue represented more than 50 percent of our total product revenue for the full year – a first in the Company’s history. We expect this trend to strengthen in 2014 when our total SBC revenue, including product, maintenance and services, is expected to represent more than half of our total Company revenue, further underscoring our successful transformation”.

Dolan continued, “During the year, we also significantly expanded our product portfolio including adding important multi-media and IMS capabilities, launching the industry’s most-scalable software-based SBC, and announcing our plans to expand into diameter signaling, arguably the fastest growing market in networking. The pace of our product innovation has accelerated and we’re not done yet. We plan to make another significant product announcement in the coming week and look forward to sharing this news during Mobile World Congress in Barcelona. As a testament to our strong performance and our future potential, we also recently added several prominent leaders to our management team and Board of Directors. In short, we have entered 2014 with, we believe, the industry’s strongest team and most competitive product portfolio. It’s an exciting time to be at Sonus.”

Mark Greenquist, chief financial officer, added, “Our solid financial performance and balance sheet have enabled us to invest in our business, both organically and through acquisitions, in order to fuel our growth engine, while also returning approximately $59 million to our shareholders through our stock buyback program. We believe that the Company is very well positioned for continued growth and value creation in 2014.”

Key Management and Board Member Additions

The Company recruited several recognized leaders to its management team and Board of Directors, including Mark Greenquist, former chief executive officer and chief financial officer of Telcordia Technologies, Inc., who joined as our chief financial officer in November 2013; Pamela D.A. Reeve, former president and chief executive officer of Lightbridge, Inc., who joined the Board of Directors in August 2013; Matthew W. Bross, chairman and chief executive officer of Compass-EOS and former chief technology officer of Huawei, British Telecom and Williams Communications; and Richard (Dick) J. Lynch, former executive vice president and chief technology officer of both Verizon Communications and Verizon Wireless. Messrs. Bross and Lynch joined the Board of Directors in February 2014.

Performance Technologies, Incorporated

On February 19, 2014, the Company announced the successful completion of its acquisition of Performance Technologies, Incorporated (PT). PT adds Diameter Signaling capabilities required in all-IP, IMS 4G/LTE (Long Term Evolution) networks, and is expected to fortify the Company’s mobility and virtualization strategies.

Software-based SBC

On October 9, 2013, the Company announced the Sonus SBC SWe (Software edition), the industry’s first software-based Session Border Controller that delivers unlimited scalability with the same advanced features and functionality of hardware on a virtualized platform. Sonus is the only vendor on the market with a common, hardened code base across its hardware and software SBC portfolio, providing customers with holistic investment protection. Scalable from as few as 25 to an unlimited number of sessions, the SBC SWe is feature equivalent to Sonus’ award-winning hardware-based Sonus SBC 5000 Series. The Sonus SBC SWe addresses service providers’ requirements for network functions virtualization (NFV) and software-defined networking (SDN)-enabled SBC technology to scale cloud-based delivery platforms.

Stock Buyback Program

During the fourth quarter of 2013, the Company repurchased a total of 7.7 million shares at a weighted average price of $2.87 per share, for a total of $22.3 million. Since the inception of the stock buyback program, which was authorized by the Board of Directors in July 2013, the Company has repurchased a total of 18.5 million shares for a total of $59.3 million as of December 31, 2013. Of this amount, 10.5 million shares were repurchased from the Company’s two largest shareholders, thereby reducing the concentration of its shareholder base in an orderly fashion. As of December 31, 2013, there were 266.2 million shares of the Company’s common stock, $0.001 par value, outstanding. Under the current plan, the Company is authorized to repurchase up to an additional $40.7 million of the Company’s common stock.

Cash & Investments

The Company ended the fourth quarter of 2013 with approximately $246 million in cash and investments, which includes the impact of the share repurchases noted above.

2014 First Quarter and Full Year Outlook

The Company’s outlook is based on current indications for its business, which may change during the current quarter. Gross margin, operating expenses and EPS are presented on a non-GAAP basis. A reconciliation of the non-GAAP to GAAP outlook and a statement on the use of non-GAAP financial measures are included at the end of this press release. SBC Total Revenue includes product, maintenance and services and, for the full year, also includes diameter signaling revenue relating to the acquisition of PT.

First Quarter 2014 Guidance

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