Sonus Networks, Inc. (Nasdaq: SONS), a leading supplier of service provider Voice over IP (VoIP) infrastructure solutions, today reported its financial results for the fourth quarter and fiscal year ended December 31, 2005.
Revenues for the fourth quarter of fiscal 2005 were $57.2 million compared with $45.1 million in the same period last year, an increase of 27%. Net income for the fourth quarter of fiscal 2005 was $5.0 million, or $0.02 per diluted share, compared with net income for the fourth quarter of fiscal 2004 of $6.3 million, or $0.02 per diluted share.
Revenues for fiscal year 2005 were $194.6 million compared with $170.7 million for fiscal year 2004, an increase of 14%. Net income for fiscal year 2005 was $8.4 million, or $0.03 per diluted share, compared with net income for fiscal year 2004 of $24.5 million, or $0.10 per diluted share.
"2005 was a strong year for Sonus, culminating with robust revenue, order and shipments growth in the fourth quarter," said Hassan Ahmed, chairman and CEO, Sonus Networks. "We are aggressively driving growth across all areas of the Company by broadening our market reach into new regions, introducing new innovative technology, expanding our footprint within our existing customers' networks and winning significant new deployments with operators in each of our global theaters." Ahmed continued, "Today's announcement that KDDI, a major carrier in Japan, is deploying a Sonus packet voice solution to replace its legacy infrastructure represents an important milestone for Sonus and the industry overall."
In a press release issued earlier today, Sonus announced that it was selected by KDDI, a leading telecommunication service provider in Japan, for a multi-million dollar contract as the exclusive vendor for its convergence-enabled packet voice network (see related announcement "KDDI Selects Sonus Networks to Deploy Largest VoIP Network in Japan"). In the first phase of this project, KDDI is deploying a full suite of Sonus' industry- leading solutions, including the GSX9000(TM) Open Services Switch, the PSX(TM) Call Routing Server and the Sonus Insight(TM) Element Management System. The new packet voice network will deliver enhanced voice services to one of the most technologically advanced societies in the world and is planned to be the largest IP telephony network in Japan. By 2008, KDDI plans to have 100 percent of its long-distance traffic on its Sonus-based VoIP network.
Fourth Quarter 2005 Summary
In the fourth quarter of 2005, Sonus Networks continued to broaden its customer base and expand its presence throughout the Europe, Middle East and Africa region. To address and service the growing market opportunity throughout Europe, Sonus Networks announced the opening of a new operations center in Prague, Czech Republic. The establishment of an office in the Czech Republic is in direct response to increased demand for Sonus solutions throughout the region. In addition to Prague, the Company now has a regional sales and support presence throughout several countries in Western Europe, including the United Kingdom, France and Germany.
Sonus announced that it was awarded a multi-million dollar contract for the worldwide expansion of T-Systems' business VoIP network. T-Systems is the business customer division of the Deutsche Telekom Group and one of Europe's leading providers of information and communications technology.
The Company reported that in tandem with its recently announced partner, TNN Networks, Sonus is delivering a complete IMS (IP Multimedia Subsystem)-ready voice over broadband (VoBB) solution to 012 Golden Lines, a leading Israeli Internet Service Provider (ISP) and a provider of international voice services for enterprises and consumers.
In Japan, Sonus continues to lead the service provider VoIP market. Synergy Research Group reported that in the third quarter of 2005, Sonus accounted for more than 61% of the total media gateway industry and more than 80% of the high density media gateway industry. Japan, which has been a key driver in global VoBB adoption, continues to be a strategic focus for Sonus.
Globally, Sonus continued to build on its worldwide leadership position. Sonus was recognized as the market share leader of carrier-class VoIP equipment for the third quarter of 2005 by Infonetics Research and Synergy Research Group. By the end of the year, according to research conducted by iLocus, Sonus' industry-leading solutions were carrying in excess of 17 billion minutes of VoIP traffic per month, a 70 percent increase compared to December 2004.
Sonus continued to drive market penetration for IP-based solutions in the fourth quarter with a new technology introduction, the Sonus-certified Consumer Voice over Broadband (c-VoBB) Solution, the first in a series of integrated IMS-ready solutions designed to enable the rapid deployment of next-generation services. The Sonus c-VoBB solution empowers network operators to enter the consumer VoIP market in a cost-efficient manner and supports a broad portfolio of IMS-ready applications.
Sonus also announced the availability of the Sonus Voice Portal, an interactive voice response system for managing consumer voice profile data. The Sonus Voice Portal was the first application created with and managed by Sonus' IMX application platform, a web-based multimedia environment that enables wireline and wireless service providers to rapidly develop, integrate, launch, and manage enhanced telecommunication applications and services.
To further promote consumer adoption of VoIP services, Sonus aligned with other industry leaders, including EarthLink, Google, Level 3, Pulver.com, Skype and USA Datanet, as founding members of the Internet Voice Campaign (IVC). Part of the VON Coalition, a non-profit, VoIP industry advocacy organization, the Internet Voice Campaign is designed to raise awareness and help educate consumers about the benefits of IP-based voice solutions.
"In the year ahead, we aim to capitalize on our increased momentum to foster demand for our solutions both in markets where Sonus has a long-standing leadership position and in those that are just beginning to embrace the benefits of VoIP," said Ahmed. "Through the success of our customers and awareness campaigns like the IVC, consumers are beginning to recognize that VoIP has the power to change the way we communicate. It's an exciting time in the evolution of communications networks, and Sonus continues to lead the world's migration to IMS-based networks."
About Sonus Networks
Sonus Networks, Inc. is a leading provider of Voice over IP (VoIP) infrastructure solutions for wireline and wireless service providers. With its comprehensive IP Multimedia Subsystem (IMS) solution, Sonus addresses the full range of carrier applications, including residential and business voice services, wireless voice and multimedia, trunking and tandem switching, carrier interconnection and enhanced services. Sonus' voice infrastructure solutions are deployed in service provider networks worldwide. Founded in 1997, Sonus is headquartered in Chelmsford, Massachusetts. Additional information on Sonus is available at http://www.sonusnet.com.
This 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. Readers are referred to the "Cautionary Statements" section of the Company's most recent quarterly report on Form 10-Q filed with the SEC, which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Risk factors include among others: the impact of material weaknesses in our disclosure controls and procedures and our internal control over financial reporting on our ability to report our financial results timely and accurately; the unpredictability of our quarterly financial results; risks associated with our international expansion and growth; consolidation in the telecommunications industry; and potential costs resulting from pending securities litigation against the company. Any forward-looking statements represent Sonus' views only as of today and should not be relied upon as representing Sonus' views as of any subsequent date. While Sonus may elect to update forward-looking statements at some point, Sonus specifically disclaims any obligation to do so.
Sonus is a registered trademark of Sonus Networks, Inc. Sonus GSX9000 Open Services Switch, PSX Call Routing Server, SGX Signaling Gateway, and the Sonus Insight Management System are trademarks of Sonus Networks, Inc. All other company and product names may be trademarks of the respective companies with which they are associated.
For more information, please contact:
Investor Relations: Media Relations:
Jocelyn Philbrook Sarah McAuley
978-614-8672 212-699-1836
jphilbrook@sonusnet.com smcauley@sonusnet.com
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Three Months Three Months
Ended Ended Ended
December 31, September 30, December 31,
2005 2005 2004
Revenues:
Product $41,908 $29,107 $31,191
Service 15,342 16,550 13,892
Total revenues 57,250 45,657 45,083
Cost of revenues:
Product 13,965 17,410 8,760
Service 6,905 6,073 4,997
Total cost of revenues 20,870 23,483 13,757
Gross profit 36,380 22,174 31,326
Gross profit %:
Product 66.7% 40.2% 71.9%
Service 55.0% 63.3% 64.0%
Total gross profit 63.5% 48.6% 69.5%
Operating expenses:
Research and development 12,483 11,787 9,348
Sales and marketing 12,881 10,834 8,935
General and administrative 8,116 5,455 7,385
Stock-based compensation 5 11 65
Amortization of purchased intangible
assets - - 601
Total operating expenses 33,485 28,087 26,334
Income (loss) from operations 2,895 (5,913) 4,992
Interest expense (121) (121) (119)
Interest income 3,092 2,690 1,477
Income (loss) before income taxes 5,866 (3,344) 6,350
Provision (benefit) for income taxes 844 (640) 89
Net income (loss) $5,022 $(2,704) $6,261
Net income (loss) per share:
Basic $0.02 $(0.01) $0.03
Diluted $0.02 $(0.01) $0.02
Weighted average shares outstanding:
Basic 249,390 248,801 247,134
Diluted 252,356 248,801 256,443
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Year Ended Year Ended
December 31, December 31,
2005 2004
Revenues:
Product $134,812 $124,087
Service 59,798 46,651
Total revenues 194,610 170,738
Cost of revenues:
Product 53,622 32,911
Service 23,898 17,656
Total cost of revenues 77,520 50,567
Gross profit 117,090 120,171
Gross profit %:
Product 60.2% 73.5%
Service 60.0% 62.2%
Total gross profit 60.2% 70.4%
Operating expenses:
Research and development 46,385 36,174
Sales and marketing 44,246 34,969
General and administrative 26,848 24,595
Stock-based compensation 20 671
Amortization of purchased intangible
assets - 2,402
Total operating expenses 117,499 98,811
(Loss) income from operations (409) 21,360
Interest expense (491) (479)
Interest income 9,879 4,283
Income before income taxes 8,979 25,164
Provision for income taxes 611 687
Net income $8,368 $24,477
Net income per share:
Basic $0.03 $0.10
Diluted $0.03 $0.10
Weighted average shares outstanding:
Basic 248,584 245,830
Diluted 253,024 253,816
SONUS NETWORKS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
December 31, December 31,
2005 2004
Assets
Current assets:
Cash and cash equivalents $155,679 $121,931
Marketable debt securities 140,569 170,145
Accounts receivable, net 72,321 32,486
Inventory, net 37,831 28,346
Other current assets 15,833 10,891
Deferred income taxes 519 -
Total current assets 422,752 363,799
Property and equipment, net 15,181 8,217
Long-term investments 17,993 21,029
Deposits 631 783
$456,557 $393,828
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $20,408 $8,654
Accrued expenses 23,204 18,240
Accrued restructuring expenses 195 186
Current portion of deferred
revenue 88,199 65,105
Convertible subordinated note 10,000 -
Current portion of long-term
liabilities 48 30
Total current liabilities 142,054 92,215
Long-term deferred revenue, less
current portion 33,853 25,960
Long-term liabilities, less current
portion 485 613
Convertible subordinated note - 10,000
Total liabilities 176,392 128,788
Commitments and contingencies - -
Stockholders' equity:
Common stock 252 250
Additional paid-in capital 1,055,941 1,049,142
Accumulated deficit (775,717) (784,085)
Accumulated other comprehensive
loss (44) -
Treasury stock (267) (267)
Total stockholders' equity 280,165 265,040
$456,557 $393,828
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
Year Ended Year Ended
Ended Ended
December 31, December 31,
2005 2004
Cash flows from operating activities:
Net income $8,368 $24,477
Adjustments to reconcile net income
to cash flows from
operating activities:
Depreciation and amortization of
property and equipment 7,976 5,796
Tax benefit from stock options
exercised - 67
Stock-based compensation 20 671
Amortization of purchased intangible
assets - 2,402
Loss of disposal of property and
equipment 142 -
Deferred income taxes (519) -
Changes in current assets and
liabilities:
Accounts receivable (40,019) (8,732)
Inventory (11,321) (14,607)
Other current assets (4,342) (3,956)
Accounts payable 11,955 5,406
Accrued expenses and accrued
restructuring expenses 3,895 (4,490)
Deferred revenue 33,067 4,065
Cash flows provided by operating
activities 9,222 11,099
Cash flows from investing activities:
Purchases of property and equipment (14,229) (9,004)
Maturities (purchases) of marketable
debt securities, net 32,612 (19,497)
Increase in restricted cash (591) -
Other assets 656 410
Cash flows provided by (used in)
investing activities 18,448 (28,091)
Cash flows from financing activities:
Sales of common stock in connection
with employee stock purchase plan 4,517 1,721
Proceeds from exercise of stock
options 2,264 3,669
Payments of long-term liabilities (87) (182)
Cash flows provided by financing
activities 6,694 5,208
Effect of exchange rate changes on
cash and cash equivalents (616) -
Net increase (decrease) in cash and
cash equivalents 33,748 (11,784)
Cash and cash equivalents, beginning
of year 121,931 133,715
Cash and cash equivalents, end of
year $155,679 $121,931