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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Radisys Corp. (delisted) | NASDAQ:RSYS | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.72 | 1.71 | 1.72 | 0 | 01:00:00 |
|
|
|
(Mark one)
|
|
[x]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended
|
March 31, 2017
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from
|
|
to
|
|
Commission File Number:
|
0-26844
|
|
|
OREGON
|
|
93-0945232
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
5435 N.E. Dawson Creek Drive, Hillsboro, OR
|
|
97124
|
(Address of principal executive offices)
|
|
(Zip Code)
|
|
|
|
(503) 615-1100
|
||
(Registrant's telephone number, including area code)
|
||
|
|
|
(Former name, former address and former fiscal year, if changed since last report)
|
|
|
|
|
Page
|
PART I. FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1. Financial Statements (Unaudited)
|
|
|
Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2017 and 2016
|
|
|
Condensed Consolidated Statements of Comprehensive Loss – Three Months Ended March 31, 2017 and 2016
|
|
|
Condensed Consolidated Balance Sheets – March 31, 2017 and December 31, 2016
|
|
|
Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2017 and 2016
|
|
|
Notes to Condensed Consolidated Financial Statements
|
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
|
|
Item 4. Controls and Procedures
|
|
|
|
|
|
PART II. OTHER INFORMATION
|
|
|
Item 1A. Risk Factors
|
|
|
Item 6. Exhibits
|
|
|
Signatures
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Revenues:
|
|
|
|
||||
Product
|
$
|
28,699
|
|
|
$
|
47,317
|
|
Service
|
8,911
|
|
|
7,829
|
|
||
Total revenue
|
37,610
|
|
|
55,146
|
|
||
Cost of sales:
|
|
|
|
||||
Product
|
22,175
|
|
|
35,732
|
|
||
Service
|
5,286
|
|
|
4,703
|
|
||
Amortization of purchased technology
|
1,927
|
|
|
1,927
|
|
||
Total cost of sales
|
29,388
|
|
|
42,362
|
|
||
Gross margin
|
8,222
|
|
|
12,784
|
|
||
Research and development
|
6,480
|
|
|
5,653
|
|
||
Selling, general and administrative
|
9,382
|
|
|
7,639
|
|
||
Intangible asset amortization
|
1,260
|
|
|
1,260
|
|
||
Restructuring and other charges, net
|
235
|
|
|
682
|
|
||
Loss from operations
|
(9,135
|
)
|
|
(2,450
|
)
|
||
Interest expense
|
(272
|
)
|
|
(117
|
)
|
||
Other income (expense), net
|
(297
|
)
|
|
139
|
|
||
Loss before income tax expense
|
(9,704
|
)
|
|
(2,428
|
)
|
||
Income tax expense
|
304
|
|
|
537
|
|
||
Net loss
|
$
|
(10,008
|
)
|
|
$
|
(2,965
|
)
|
Net loss per share:
|
|
|
|
||||
Basic
|
$
|
(0.26
|
)
|
|
$
|
(0.08
|
)
|
Diluted
|
$
|
(0.26
|
)
|
|
$
|
(0.08
|
)
|
Weighted average shares outstanding:
|
|
|
|
||||
Basic
|
38,715
|
|
|
37,007
|
|
||
Diluted
|
38,715
|
|
|
37,007
|
|
||
|
|
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Net loss
|
$
|
(10,008
|
)
|
|
$
|
(2,965
|
)
|
Other comprehensive income:
|
|
|
|
||||
Translation adjustments gain
|
664
|
|
|
457
|
|
||
Net adjustment for fair value of hedge derivatives, net of tax
|
502
|
|
|
134
|
|
||
Other comprehensive income
|
1,166
|
|
|
591
|
|
||
Comprehensive loss
|
$
|
(8,842
|
)
|
|
$
|
(2,374
|
)
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
32,025
|
|
|
$
|
33,087
|
|
Accounts receivable, net
|
49,925
|
|
|
38,378
|
|
||
Other receivables
|
3,446
|
|
|
4,161
|
|
||
Inventories, net
|
10,845
|
|
|
20,021
|
|
||
Other current assets
|
3,557
|
|
|
2,990
|
|
||
Total current assets
|
99,798
|
|
|
98,637
|
|
||
Property and equipment, net
|
7,325
|
|
|
6,713
|
|
||
Intangible assets, net
|
14,388
|
|
|
17,575
|
|
||
Long-term deferred tax assets, net
|
1,013
|
|
|
1,117
|
|
||
Other assets
|
2,035
|
|
|
4,143
|
|
||
Total assets
|
$
|
124,559
|
|
|
$
|
128,185
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
13,674
|
|
|
$
|
20,805
|
|
Accrued wages and bonuses
|
4,144
|
|
|
6,572
|
|
||
Deferred revenue
|
6,496
|
|
|
5,715
|
|
||
Line of credit
|
40,000
|
|
|
25,000
|
|
||
Other accrued liabilities
|
6,631
|
|
|
7,571
|
|
||
Total current liabilities
|
70,945
|
|
|
65,663
|
|
||
Long-term liabilities:
|
|
|
|
||||
Other long-term liabilities
|
6,782
|
|
|
5,966
|
|
||
Total long-term liabilities
|
6,782
|
|
|
5,966
|
|
||
Total liabilities
|
77,727
|
|
|
71,629
|
|
||
Commitments and contingencies (Note 7)
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Common stock — no par value, 100,000 shares authorized; 38,919 and 38,521 shares issued and outstanding at March 31, 2017 and December 31, 2016
|
340,811
|
|
|
339,715
|
|
||
Accumulated deficit
|
(293,586
|
)
|
|
(281,600
|
)
|
||
Accumulated other comprehensive loss:
|
|
|
|
||||
Cumulative translation adjustments
|
(368
|
)
|
|
(1,032
|
)
|
||
Unrealized loss on hedge instruments
|
(25
|
)
|
|
(527
|
)
|
||
Total accumulated other comprehensive loss
|
(393
|
)
|
|
(1,559
|
)
|
||
Total shareholders’ equity
|
46,832
|
|
|
56,556
|
|
||
Total liabilities and shareholders’ equity
|
$
|
124,559
|
|
|
$
|
128,185
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(10,008
|
)
|
|
(2,965
|
)
|
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
4,358
|
|
|
4,345
|
|
||
Inventory valuation allowance and adverse purchase commitment charges
|
702
|
|
|
545
|
|
||
Deferred income taxes
|
195
|
|
|
12
|
|
||
Stock-based compensation expense
|
1,154
|
|
|
688
|
|
||
Other
|
(185
|
)
|
|
372
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(11,547
|
)
|
|
22,134
|
|
||
Other receivables
|
741
|
|
|
8,254
|
|
||
Inventories
|
8,681
|
|
|
578
|
|
||
Accounts payable
|
(7,038
|
)
|
|
(12,155
|
)
|
||
Accrued restructuring
|
(1,124
|
)
|
|
435
|
|
||
Accrued wages and bonuses
|
(2,368
|
)
|
|
(3,207
|
)
|
||
Deferred revenue
|
1,578
|
|
|
(16,693
|
)
|
||
Other
|
350
|
|
|
(661
|
)
|
||
Net cash provided by (used in) operating activities
|
(14,511
|
)
|
|
1,682
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(1,803
|
)
|
|
(422
|
)
|
||
Net cash used in investing activities
|
(1,803
|
)
|
|
(422
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Borrowings on line of credit
|
37,000
|
|
|
18,000
|
|
||
Payments on line of credit
|
(22,000
|
)
|
|
(18,000
|
)
|
||
Net settlement of restricted shares
|
(192
|
)
|
|
(2
|
)
|
||
Other financing activities
|
108
|
|
|
107
|
|
||
Net cash provided by financing activities
|
14,916
|
|
|
105
|
|
||
Effect of exchange rate changes on cash
|
336
|
|
|
254
|
|
||
Net increase (decrease) in cash and cash equivalents
|
(1,062
|
)
|
|
1,619
|
|
||
Cash and cash equivalents, beginning of period
|
33,087
|
|
|
20,764
|
|
||
Cash and cash equivalents, end of period
|
$
|
32,025
|
|
|
$
|
22,383
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Interest
|
$
|
247
|
|
|
$
|
123
|
|
Income taxes
|
$
|
286
|
|
|
$
|
228
|
|
|
Fair Value Measurements as of March 31, 2017
|
||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||
Foreign currency forward contracts
|
$
|
846
|
|
|
—
|
|
|
$
|
846
|
|
|
—
|
|
|
Fair Value Measurements as of December 31, 2016
|
||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||
Foreign currency forward contracts
|
$
|
94
|
|
|
—
|
|
|
$
|
94
|
|
|
—
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Accounts receivable, gross
|
$
|
49,980
|
|
|
$
|
38,433
|
|
Less: allowance for doubtful accounts
|
(55
|
)
|
|
(55
|
)
|
||
Accounts receivable, net
|
$
|
49,925
|
|
|
$
|
38,378
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Raw materials
|
$
|
16,917
|
|
|
$
|
24,805
|
|
Work-in-process
|
—
|
|
|
12
|
|
||
Finished goods
|
3,924
|
|
|
5,005
|
|
||
|
20,841
|
|
|
29,822
|
|
||
Less: inventory valuation allowance
|
(9,996
|
)
|
|
(9,801
|
)
|
||
Inventories, net
|
$
|
10,845
|
|
|
$
|
20,021
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Inventory, net
|
$
|
501
|
|
|
$
|
266
|
|
Adverse purchase commitments
(A)
|
201
|
|
|
279
|
|
||
Net charges
|
$
|
702
|
|
|
$
|
545
|
|
(A)
|
When the Company takes possession of inventory reserved for under the adverse purchase liability (Note 7 —
Commitments and Contingencies),
the associated liability is transferred from other accrued liabilities to the excess and obsolete inventory valuation allowance.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Employee-related restructuring expenses
|
$
|
42
|
|
|
$
|
682
|
|
Integration-related and other non-recurring expenses
|
193
|
|
|
—
|
|
||
Restructuring and other charges, net
|
$
|
235
|
|
|
$
|
682
|
|
•
|
$0.1 million
net expense relating to the severance for 2 employees in connection with a reduction to our hardware engineering presence in Shenzhen; and
|
•
|
$0.2 million
in non-recurring legal expenses associated with closing a strategic agreement with a MediaEngine channel partner.
|
•
|
$0.7 million
net expense relating to the severance for 21 employees primarily in connection with a reduction to our hardware engineering presence in Asia.
|
|
Severance, payroll taxes and other employee benefits
|
|
Facility reductions
|
|
Total
|
||||||
Balance accrued as of December 31, 2016
|
$
|
1,347
|
|
|
$
|
90
|
|
|
$
|
1,437
|
|
Additions
|
156
|
|
|
—
|
|
|
156
|
|
|||
Reversals
|
(114
|
)
|
|
—
|
|
|
(114
|
)
|
|||
Expenditures
|
(1,136
|
)
|
|
(30
|
)
|
|
(1,166
|
)
|
|||
Balance accrued as of March 31, 2017
|
$
|
253
|
|
|
$
|
60
|
|
|
$
|
313
|
|
•
|
When Availability is
70%
or more, the interest rate is the prime rate (as published in Wall Street Journal) plus
0.50%
;
|
•
|
When Availability is
30%
or more and less than
70%
, the interest rate is the prime rate plus
0.75%
; and
|
•
|
When Availability is below
30%
, the interest rate is the prime rate plus
1.00%
.
|
•
|
When Availability is
70%
or more, the interest rate is the prime rate plus
0.25%
;
|
•
|
When Availability is
30%
or more and less than
70%
, the interest rate is the prime rate plus
0.50%
; and
|
•
|
When Availability is below
30%
, the interest rate is the prime rate plus
0.75%
.
|
•
|
When Availability is
70%
or more, the commitment fee is
0.35%
of the average unused portion of the revolving credit commitment;
|
•
|
When Availability is
30%
or more and less than
70%
, the commitment fee is
0.325%
of the average unused portion of the revolving credit commitment; and
|
•
|
When Availability is below
30%
, the commitment fee is
0.3%
of the average unused portion of the revolving credit commitment.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Warranty liability balance, beginning of the period
|
$
|
1,821
|
|
|
$
|
2,553
|
|
Product warranty accruals
|
223
|
|
|
385
|
|
||
Utilization of accrual
|
(315
|
)
|
|
(603
|
)
|
||
Warranty liability balance, end of the period
|
$
|
1,729
|
|
|
$
|
2,335
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Numerator
|
|
|
|
||||
Net loss
|
$
|
(10,008
|
)
|
|
$
|
(2,965
|
)
|
Denominator — Basic
|
|
|
|
||||
Weighted average shares used to calculate net loss per share, basic
|
38,715
|
|
|
37,007
|
|
||
Denominator — Diluted
|
|
|
|
||||
Weighted average shares used to calculate net loss per share, basic
|
38,715
|
|
|
37,007
|
|
||
Effect of dilutive restricted stock units
(A)
|
—
|
|
|
—
|
|
||
Effect of dilutive stock options
(A)
|
—
|
|
|
—
|
|
||
Weighted average shares used to calculate net loss per share, diluted
|
38,715
|
|
|
37,007
|
|
||
Net loss per share
|
|
|
|
||||
Basic
|
$
|
(0.26
|
)
|
|
$
|
(0.08
|
)
|
Diluted
|
$
|
(0.26
|
)
|
|
$
|
(0.08
|
)
|
(A)
|
For the
three
months ended
March 31, 2017
and
2016
, the following equity awards, by type, were excluded from the calculation, as their effect would have been anti-dilutive (in thousands):
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2017
|
|
2016
|
||
Stock options
|
3,827
|
|
|
2,808
|
|
Restricted stock units
|
541
|
|
|
122
|
|
Performance based restricted stock units
(B)
|
1,049
|
|
|
2,305
|
|
Total equity award shares excluded
|
5,417
|
|
|
5,235
|
|
(B)
|
Performance based restricted stock units are presented based on attainment of 100% of the performance goals being met.
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2017
|
|
2016
|
||
Stock options
|
—
|
|
|
1,036
|
|
Restricted stock units
|
467
|
|
|
—
|
|
Performance based restricted stock awards
(A)
|
670
|
|
|
680
|
|
Total
|
1,137
|
|
|
1,716
|
|
(A)
|
On March 10, 2017, the Compensation Committee approved grants of performance-based restricted stock units ("PRSUs") to certain employees. The awards will vest only on satisfaction of certain performance criteria during two separate annual performance periods and a portion of the award earned will vest upon satisfaction of a time-based service component. 50% of the awards can be earned by meeting strategic revenue targets in fiscal year 2017 and 50% can be earned by meeting strategic revenue targets in fiscal year 2018. One-half of any PRSUs earned during each performance period will vest upon meeting the performance criteria, and the remaining half will be subject to a further time-based service component and will vest one year after meeting the targets. By meeting the relevant performance criteria set forth in the award agreement, employees can earn 0%, 75%, 100% or 125% of the award during each performance period. If an employee earns less than 100% of the award for the 2017 performance period, the employee is eligible to earn the remaining portion of the award in fiscal year 2018 if cumulative 2017 and 2018 strategic revenue targets are met in the two year period. Shares are presented based on attainment of 100% of the performance goals being met. At attainment of 125%, the amount of shares eligible to be earned is 837,500.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Cost of sales
|
$
|
97
|
|
|
$
|
46
|
|
Research and development
|
230
|
|
|
153
|
|
||
Selling, general and administrative
|
827
|
|
|
489
|
|
||
Total
|
$
|
1,154
|
|
|
$
|
688
|
|
|
|
Contractual/ Notional
Amount
|
|
Condensed Consolidated Balance Sheet
Classification
|
|
Estimated Fair Value
|
||||||||
Type of Cash Flow Hedge
|
|
Asset
|
|
(Liability)
|
||||||||||
Foreign currency forward exchange contracts
|
|
$
|
16,963
|
|
|
Other current assets
|
|
$
|
846
|
|
|
$
|
—
|
|
|
|
Contractual/ Notional
Amount
|
|
Condensed Consolidated Balance Sheet
Classification
|
|
Estimated Fair Value
|
||||||||
Type of Cash Flow Hedge
|
|
Asset
|
|
(Liability)
|
||||||||||
Foreign currency forward exchange contracts
|
|
$
|
16,166
|
|
|
Other current assets
|
|
$
|
94
|
|
|
$
|
—
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Cost of sales
|
$
|
10
|
|
|
$
|
108
|
|
Research and development
|
14
|
|
|
173
|
|
||
Selling, general and administrative
|
5
|
|
|
67
|
|
||
Total
|
$
|
29
|
|
|
$
|
348
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Beginning balance of unrealized loss on forward exchange contracts
|
$
|
(527
|
)
|
|
$
|
(819
|
)
|
Other comprehensive income (loss) before reclassifications
|
473
|
|
|
(214
|
)
|
||
Amounts reclassified from other comprehensive income (loss)
|
29
|
|
|
348
|
|
||
Other comprehensive income (loss)
|
502
|
|
|
134
|
|
||
Ending balance of unrealized loss on forward exchange contracts
|
$
|
(25
|
)
|
|
$
|
(685
|
)
|
•
|
Software-Systems. Software-Systems is comprised of three product lines: FlowEngine, MediaEngine and CellEngine, each of which delivers software-centric solutions to service providers.
|
•
|
Hardware Solutions. Hardware Solutions includes the Company's DCEngine products and legacy embedded product portfolio which includes hardware solutions targeted for service providers.
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Revenue
|
|
|
|
|
||||
Software-Systems
|
|
$
|
10,149
|
|
|
$
|
14,059
|
|
Hardware Solutions
|
|
27,461
|
|
|
41,087
|
|
||
Total revenues
|
|
$
|
37,610
|
|
|
$
|
55,146
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Gross margin
|
|
|
|
||||
Software-Systems
|
$
|
5,465
|
|
|
$
|
8,788
|
|
Hardware Solutions
|
4,781
|
|
|
5,969
|
|
||
Corporate and other
|
(2,024
|
)
|
|
(1,973
|
)
|
||
Total gross margin
|
$
|
8,222
|
|
|
$
|
12,784
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Income (loss) from operations
|
|
|
|
|
||||
Software-Systems
|
|
$
|
(3,273
|
)
|
|
$
|
780
|
|
Hardware Solutions
|
|
(1,286
|
)
|
|
1,327
|
|
||
Corporate and other
|
|
(4,576
|
)
|
|
(4,557
|
)
|
||
Total loss from operations
|
|
$
|
(9,135
|
)
|
|
$
|
(2,450
|
)
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
United States
|
$
|
23,152
|
|
|
$
|
37,765
|
|
Other North America
|
19
|
|
|
78
|
|
||
Asia Pacific ("APAC")
|
5,419
|
|
|
7,618
|
|
||
Netherlands
|
5,223
|
|
|
7,235
|
|
||
Other EMEA
|
3,797
|
|
|
2,450
|
|
||
Europe, the Middle East and Africa (“EMEA”)
|
9,020
|
|
|
9,685
|
|
||
Foreign Countries
|
14,458
|
|
|
17,381
|
|
||
Total
|
$
|
37,610
|
|
|
$
|
55,146
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Property and equipment, net
|
|
|
|
||||
United States
|
$
|
4,950
|
|
|
$
|
4,566
|
|
Other North America
|
102
|
|
|
129
|
|
||
China
|
406
|
|
|
438
|
|
||
India
|
1,867
|
|
|
1,580
|
|
||
Total APAC
|
2,273
|
|
|
2,018
|
|
||
Foreign Countries
|
2,375
|
|
|
2,147
|
|
||
Total property and equipment, net
|
$
|
7,325
|
|
|
$
|
6,713
|
|
|
|
|
|
||||
Intangible assets, net
|
|
|
|
||||
United States
|
$
|
14,388
|
|
|
$
|
17,575
|
|
Total intangible assets, net
|
$
|
14,388
|
|
|
$
|
17,575
|
|
The following customers accounted for more than 10% of accounts receivable:
|
|
|
|
||
|
March 31, 2017
|
|
December 31, 2016
|
||
Customer A
|
37.7
|
%
|
|
10.4
|
%
|
Customer D
|
24.0
|
%
|
|
32.6
|
%
|
Customer B
|
N/A
|
|
|
15.4
|
%
|
•
|
Software-Systems products are targeted at delivering differentiated solutions for service providers to enable their deployment of next generation networks and technologies. Software-Systems products include the following three product families:
|
◦
|
FlowEngine products target the communication service provider traffic management market and is a family of products designed to rapidly classify millions of data flows and then distribute these flows to thousands of Virtualized Network Functions ("VNF"). FlowEngine offloads the processing for packet classification and distribution, improving virtualized function utilization and making the overall Network Functions Virtualization ("NFV") architecture more efficient. A FlowEngine system consists of FlowEngine software running on a Traffic Distribution Engine ("TDE") platform. FlowEngine Software enables communication service providers to efficiently transition towards NFV and software-defined networking ("SDN") architectures allowing increased service agility and quicker time to revenue for new service offerings. FlowEngine accomplishes this by integrating a targeted subset of edge routing, data center switching, and load balancing functionality, coupled with standards based SDN protocols, enabling our customers to significantly reduce the investment necessary to efficiently process data flows in virtualized communications environments.
|
◦
|
MediaEngine products are designed into the IP Multimedia Subsystem ("IMS") core of telecom networks, providing the necessary media processing capabilities required for a broad range of applications including Voice over Long-Term Evolution ("VoLTE"), Voice over WiFi (“VoWifi”), Web Real-Time Communication ("WebRTC"), multimedia conferencing, as well as the transcoding required to achieve interoperability between legacy and new generation devices using disparate audio and video codecs. Our MediaEngine OneMRF strategy helps service providers consolidate their real-time IP media processing into a vendor and application agnostic platform, which drives cost out of their service delivery platform and enables accelerated deployment and introduction of new services. We sell a turnkey high density system, the MediaEngine MPX-12000, as well as a virtualized software-only vMRF for customers who require media processing in an NFV architecture or lower-density processing platforms. As service providers consolidate network capacity from older (3G and 2G) architectures onto new LTE architectures, they will deploy IMS and VoLTE applications. Our MediaEngine provides the essential media processing capability that enables service providers to deliver audio, video or other multimedia services over their all-IP networks.
|
◦
|
CellEngine software provides the enabling technology for fifth generation radio access networks (“5G RAN”) and is optimized for spectrum utilization, densification and network slicing to serve multiple users for mobility, latency and capacity. This builds on CellEngine’s portfolio of existing solutions for Radio Access Networks (“RAN”) and Evolved Packet Core (“EPC”) for Long-Term Evolution (“LTE”), LTE-Advanced and LTE-Advanced pro. An emerging area of focus is the Internet of Things (“IoT”) market for lower power wireless area networks which are enabled by Category M1 (“Cat-M1”) and Narrowband IoT. CellEngine software is licensed to Original Equipment Manufacturers (“OEMS”), Original Design Manufacturers (“ODMs”) and operators who are building solutions for femtocells, small cells, metrocells, picocells as well as in-building, stadium and smart cities leveraging centralized RAN (“CRAN”). Additionally, we leverage our CellEngine technology to enable applications to capture share in adjacent markets such as aerospace and defense, public safety and test and measurement.
|
◦
|
Also included in this segment is our Professional Services organization that is staffed with telecommunications experts who are available to assist our customers as they develop their own unique telecommunications products and applications as well as accelerating specific features developed across our Software-Systems product families. Our strategy is to enable the efficient and cost-effective adoption of our Software-Systems products as well as enabling service providers to migrate to next-generation software-defined network deployments.
|
•
|
Hardware Solutions leverages our hardware design experience, coupled with our manufacturing, supply chain, integration and service capabilities, to enable continued differentiation from our competition. Our products include the following two primary product families:
|
◦
|
DCEngine products include open-based rack-scale systems, utilizing Open Compute Project (“OCP") accepted specifications, which enable service providers to migrate their existing infrastructure to embrace the efficiencies and scale of data center environments. This recently launched product suite brings the economies of the data center and the agility of the cloud to service provider infrastructure, allowing them to accelerate the transformation to cloud based compute, storage and networking fabrics utilizing the best of commodity components, open source hardware specifications and software coupled with world class service and support. The DCEngine platform enables service providers to drive innovation and the rapid scalable delivery of virtualized network functions at the network edge, enabling new services such as storage backup, video on demand and parental controls.
|
◦
|
Embedded products which includes our ATCA, computer-on-module express (COM Express) and rack mount servers. These products are predominantly hardware-based and include both our internal designs as well as increasingly leveraging third party hardware which incorporates our management software and services capabilities. Our products enable the control and movement of data in both 3G and LTE telecom networks and provide the hardware enablement for network elements applications such as Deep Packet Inspection ("DPI"), policy management and intelligent gateways (security, femto and LTE gateways). Additionally, our products enable image processing capabilities for healthcare markets and enable cost-effective and energy-efficient computing capabilities dedicated for industrial deployments. Our professional service organization of systems architects, hardware designers, and network experts accelerates our customers' time to market on these revenue generating assets.
|
•
|
Revenues decreased
$17.5 million
to
$37.6 million
for the
three
months ended
March 31, 2017
from
$55.1 million
for the
three
months ended
March 31, 2016
. Hardware Solutions revenue decreased
$13.6 million
, due to a $5.8 million decline in revenue from our DCEngine product line that was the result of non-linear ordering patterns from a tier-one U.S. service provider. Additionally, non-core legacy product sales declined $7.8 million as certain legacy products trend towards end of life. Software-Systems revenue decreased by
$3.9 million
as the result of the timing of orders from two of our top customers.
|
•
|
Gross margin percent declined 130 basis points to
21.9%
for the
three
months ended
March 31, 2017
from
23.2%
for the three months ended
March 31, 2016
. The $17.5 million decrease in revenue described above absorbed less of the fixed $1.9 million of amortized purchased technology recognized in both periods resulting in a 160 basis decrease quarter over quarter. This was partially offset by improved standard gross margins given product mix as well as higher DCEngine product margins due to maturing manufacturing and integration processes.
|
•
|
R&D expense increased by
$0.8 million
to
$6.5 million
for the
three
months ended
March 31, 2017
from
$5.7 million
in 2016. This is the result of increased headcount and other product development expenses related to continued investment in our strategic product lines, including the introduction of our new FlowEngine appliance expected to be deployed in mid-2017.
|
•
|
SG&A expense increased
$1.7 million
to
$9.4 million
for the
three
months ended
March 31, 2017
from
$7.6 million
for the
three
months ended
March 31, 2016
. This is the result of headcount growth in sales and marketing as we have accelerated hiring to support our strategic product line growth initiatives.
|
•
|
Cash and cash equivalents on
March 31, 2017
decreased
$1.1 million
to
$32.0 million
from
$33.1 million
at
December 31, 2016
. The decrease was the result of
$14.5 million
cash consumption from operations which was the result of working capital timing due to fulfillment of DCEngine product orders that were shipped during the quarter and capital expenditures of
$1.8 million
. The consumption was partially offset by a $15.0 million net draw on our line of credit.
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2017
|
|
2016
|
||
Revenues:
|
|
|
|
||
Product
|
76.3
|
%
|
|
85.8
|
%
|
Service
|
23.7
|
|
|
14.2
|
|
Total revenues
|
100.0
|
|
|
100.0
|
|
Cost of sales:
|
|
|
|
||
Product
|
59.0
|
|
|
64.8
|
|
Service
|
14.1
|
|
|
8.5
|
|
Amortization of purchased technology
|
5.0
|
|
|
3.5
|
|
Total cost of sales
|
78.1
|
|
|
76.8
|
|
Gross margin
|
21.9
|
|
|
23.2
|
|
Research and development
|
17.2
|
|
|
10.3
|
|
Selling, general, and administrative
|
24.9
|
|
|
13.9
|
|
Intangible asset amortization
|
3.5
|
|
|
2.3
|
|
Restructuring and other charges, net
|
0.6
|
|
|
1.1
|
|
Loss from operations
|
(24.3
|
)
|
|
(4.4
|
)
|
Interest expense
|
(0.7
|
)
|
|
(0.2
|
)
|
Other income, net
|
(0.8
|
)
|
|
0.2
|
|
Loss before income tax expense
|
(25.8
|
)
|
|
(4.4
|
)
|
Income tax expense
|
0.8
|
|
|
1.0
|
|
Net loss
|
(26.6
|
)%
|
|
(5.4
|
)%
|
|
|
Three Months Ended
|
|||||||||
|
|
March 31,
|
|||||||||
|
|
2017
|
|
2016
|
|
Change
|
|||||
Revenue
|
|
|
|
|
|
|
|||||
Software-Systems
|
|
$
|
10,149
|
|
|
$
|
14,059
|
|
|
(27.8
|
)%
|
Hardware Solutions
|
|
27,461
|
|
|
41,087
|
|
|
(33.2
|
)
|
||
Total revenues
|
|
$
|
37,610
|
|
|
$
|
55,146
|
|
|
(31.8
|
)%
|
|
Three Months Ended
|
|||||||||
|
March 31,
|
|||||||||
|
2017
|
|
2016
|
|
Change
|
|||||
North America
|
$
|
23,171
|
|
|
$
|
37,843
|
|
|
(38.8
|
)%
|
Asia Pacific
|
5,419
|
|
|
7,618
|
|
|
(28.9
|
)
|
||
Europe, the Middle East and Africa ("EMEA")
|
9,020
|
|
|
9,685
|
|
|
(6.9
|
)
|
||
Total
|
$
|
37,610
|
|
|
$
|
55,146
|
|
|
(31.8
|
)%
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2017
|
|
2016
|
||
North America
|
61.6
|
%
|
|
68.6
|
%
|
Asia Pacific
|
14.4
|
|
|
13.8
|
|
EMEA
|
24.0
|
|
|
17.6
|
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
|
|
Three Months Ended
|
|||||||||
|
|
March 31,
|
|||||||||
|
|
2017
|
|
2016
|
|
Change
|
|||||
Gross margin
|
|
|
|
|
|
|
|||||
Software-Systems
|
|
$
|
5,465
|
|
|
$
|
8,788
|
|
|
(37.8
|
)%
|
Hardware Solutions
|
|
4,781
|
|
|
5,969
|
|
|
(19.9
|
)
|
||
Corporate and other
|
|
(2,024
|
)
|
|
(1,973
|
)
|
|
2.6
|
|
||
Total gross margin
|
|
$
|
8,222
|
|
|
$
|
12,784
|
|
|
(35.7
|
)%
|
|
|
Three Months Ended
|
|||||||
|
|
March 31,
|
|||||||
|
|
2017
|
|
2016
|
|
Change
|
|||
Gross margin
|
|
|
|
|
|
|
|||
Software-Systems
|
|
53.8
|
%
|
|
62.5
|
%
|
|
(13.9
|
)%
|
Hardware Solutions
|
|
17.4
|
|
|
14.5
|
|
|
20.0
|
|
Corporate and other
|
|
—
|
|
|
—
|
|
|
—
|
|
Total gross margin
|
|
21.9
|
%
|
|
23.2
|
%
|
|
(5.6
|
)%
|
|
Three Months Ended
|
||||||||
|
March 31,
|
||||||||
|
2017
|
|
2016
|
|
Change
|
||||
Research and development
|
$
|
6,480
|
|
|
$
|
5,653
|
|
|
14.6%
|
Selling, general and administrative
|
9,382
|
|
|
7,639
|
|
|
22.8
|
||
Intangible asset amortization
|
1,260
|
|
|
1,260
|
|
|
—
|
||
Restructuring and other charges, net
|
235
|
|
|
682
|
|
|
(65.5)
|
||
Total
|
$
|
17,357
|
|
|
$
|
15,234
|
|
|
13.9%
|
•
|
$0.1 million
net expense relating to the severance for 2 employees in connection with a reduction to our hardware engineering presence in Shenzhen; and
|
•
|
$0.2 million
in non-recurring legal expenses associated with closing a strategic agreement with a MediaEngine channel partner.
|
•
|
$0.7 million net expense relating to the severance for 21 employees primarily in connection with a reduction to our hardware engineering presence in Asia.
|
|
Three Months Ended
|
|||||||||
|
March 31,
|
|||||||||
|
2017
|
|
2016
|
|
Change
|
|||||
Cost of sales
|
$
|
97
|
|
|
$
|
46
|
|
|
110.9
|
%
|
Research and development
|
230
|
|
|
153
|
|
|
50.3
|
|
||
Selling, general and administrative
|
827
|
|
|
489
|
|
|
69.1
|
|
||
Total
|
$
|
1,154
|
|
|
$
|
688
|
|
|
67.7
|
%
|
|
|
Three Months Ended
|
|||||||||
|
|
March 31,
|
|||||||||
|
|
2017
|
|
2016
|
|
Change
|
|||||
Income (loss) from operations
|
|
|
|
|
|
|
|||||
Software-Systems
|
|
$
|
(3,273
|
)
|
|
$
|
780
|
|
|
(519.6
|
)%
|
Hardware Solutions
|
|
(1,286
|
)
|
|
1,327
|
|
|
(196.9
|
)
|
||
Corporate and other
|
|
(4,576
|
)
|
|
(4,557
|
)
|
|
0.4
|
|
||
Total income (loss) from operations
|
|
$
|
(9,135
|
)
|
|
$
|
(2,450
|
)
|
|
272.9
|
%
|
|
Three Months Ended
|
|||||||||
|
March 31,
|
|||||||||
|
2017
|
|
2016
|
|
Change
|
|||||
Interest expense
|
$
|
(272
|
)
|
|
$
|
(117
|
)
|
|
132.5
|
%
|
Interest income
|
45
|
|
|
38
|
|
|
18.4
|
|
||
Other income (expense), net
|
(342
|
)
|
|
101
|
|
|
(438.6
|
)
|
||
Total
|
$
|
(569
|
)
|
|
$
|
22
|
|
|
(2,686.4
|
)%
|
|
Three Months Ended
|
|||||||||
|
March 31,
|
|||||||||
|
2017
|
|
2016
|
|
Change
|
|||||
Income tax expense
|
$
|
304
|
|
|
$
|
537
|
|
|
(43.4
|
)%
|
|
March 31,
2017 |
|
December 31,
2016 |
|
March 31,
2016 |
||||||
Cash and cash equivalents
|
$
|
32,025
|
|
|
$
|
33,087
|
|
|
$
|
22,383
|
|
Working capital
|
28,853
|
|
|
32,974
|
|
|
30,551
|
|
|||
Accounts receivable, net
|
49,925
|
|
|
38,378
|
|
|
38,813
|
|
|||
Inventories, net
|
10,845
|
|
|
20,021
|
|
|
30,095
|
|
|||
Accounts payable
|
13,674
|
|
|
20,805
|
|
|
31,214
|
|
|||
Line of credit
|
40,000
|
|
|
25,000
|
|
|
15,000
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Operating Activities
|
|
|
|
||||
Net loss
|
(10,008
|
)
|
|
$
|
(2,965
|
)
|
|
Non-cash adjustments
|
6,224
|
|
|
5,683
|
|
||
Changes in operating assets and liabilities
|
(10,727
|
)
|
|
(1,036
|
)
|
||
Cash provided by operating activities
|
(14,511
|
)
|
|
1,682
|
|
||
Cash used in investing activities
|
(1,803
|
)
|
|
(422
|
)
|
||
Cash provided by financing activities
|
14,916
|
|
|
105
|
|
||
Effects of exchange rate changes
|
336
|
|
|
254
|
|
||
Net increase (decrease) in cash and cash equivalents
|
$
|
(1,062
|
)
|
|
$
|
1,619
|
|
•
|
Accounts receivable increased by
$11.5 million
due to the timing of collections and shipments to a tier-one U.S. service provider associated with DCEngine sales;
|
•
|
Inventories decreased by
$8.7 million
as the result of the aforementioned DCEngine sales;
|
•
|
Accounts payable decreased
$7.0 million
due to decreases in payables related to the fulfillment of DCEngine orders as well as decreases in payables to our contract manufacturer;
|
•
|
Accrued wages and bonuses decreased $2.4 million due to the payment of accrued severance and accrued bonuses.
|
•
|
Short-term and long-term deferred revenue increased
$1.6 million
due to the recognition of deferred service contracts.
|
•
|
the Company's business strategy;
|
•
|
changes in reporting segments;
|
•
|
expectations and goals for revenues, gross margin, research and development ("R&D") expenses, selling, general and administrative ("SG&A") expenses and profits;
|
•
|
the impact of our restructuring events on future operating results, including statements related to future growth, expense savings or reduction or operational and administrative efficiencies;
|
•
|
timing of revenue recognition;
|
•
|
expected customer orders;
|
•
|
our projected liquidity;
|
•
|
future operations and market conditions;
|
•
|
industry trends or conditions and the business environment;
|
•
|
future levels of inventory and backlog and new product introductions;
|
•
|
financial performance, revenue growth, management changes or other attributes of Radisys following acquisition or divestiture activities
|
•
|
continued implementation of the Company's next-generation datacenter product; and
|
•
|
other statements that are not historical facts.
|
Exhibit 10.1
|
First Amendment to the Credit Agreement, dated January 5, 2017, between Radisys Corporation, as borrower, Silicon Valley Bank, as administrative agent, and the other lenders party thereto. Incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 10, 2017 (SEC File No. 000-26844).
|
Exhibit 31.1*
|
Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 31.2*
|
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 32.1**
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 32.2**
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE*
|
XBRL Taxonomy Presentation Linkbase
|
101.DEF*
|
XBRL Taxonomy Definition Linkbase
|
*
|
Filed herewith
|
**
|
Furnished herewith
|
|
|
|
RADISYS CORPORATION
|
|
Dated:
|
May 2, 2017
|
|
By:
|
/s/ Brian Bronson
|
|
|
|
|
Brian Bronson
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
Dated:
|
May 2, 2017
|
|
By:
|
/s/ Jonathan Wilson
|
|
|
|
|
Jonathan Wilson
|
|
|
|
|
Chief Financial Officer and Vice President of Finance
(Principal Financial and Accounting Officer)
|
Exhibit 10.1
|
First Amendment to the Credit Agreement, dated January 5, 2017, between Radisys Corporation, as borrower, Silicon Valley Bank, as administrative agent, and the other lenders party thereto. Incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 10, 2017 (SEC File No. 000-26844).
|
Exhibit 31.1*
|
Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 31.2*
|
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 32.1**
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 32.2**
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE*
|
XBRL Taxonomy Presentation Linkbase
|
101.DEF*
|
XBRL Taxonomy Definition Linkbase
|
*
|
Filed herewith
|
**
|
Furnished herewith
|
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