Veraz Networks, Inc. (NASDAQ:VRAZ), a leading provider of
Multimedia Generation Network (MGN) application, control, and
bandwidth optimization products, today announced financial results
for the second quarter ended June 30, 2010, and provided an update
concerning the proposed merger with Dialogic.
“We began to see significant traction in Q2 with our SBC
product. While we are encouraged by the market response to this new
product, we saw lower than anticipated overall revenues for Q2,
largely driven by restrictions in shipping already accepted orders
in India--an issue that is being experienced by many of the
technology companies selling into Indian carriers,” said Doug
Sabella, Chief Executive Officer of Veraz Networks. “The impact of
the Indian restrictions amounted to $1.5M for Q2. However, our
order backlog remains at a near all time high, and we are confident
that our announced plans to merge with Dialogic will give us the
size and scale needed to remain a true mission critical supplier to
our customers,” said Sabella.
Financial Highlights
- Revenues were $14.7 million, a
9% decrease over the preceding quarter and a 13% decrease over the
second quarter of 2009.
- Cash used in operating
activities was $(0.4 million) and at the end of the second quarter
2010, the company had cash, cash equivalents, restricted cash and
short-term investments of $30.6 million and no debt.
- Gross margin was 57%, as
compared to 56% for the preceding quarter and 54% for the second
quarter of 2009.
- Operating expenses were $14.0
million, flat as compared to the preceding quarter and an 8%
increase over the second quarter of 2009
- Net loss was $(6.2 million) or
$(0.14) loss per share, as compared to a $(5.2 million) or $(0.12)
loss per share in the preceding quarter and a $(2.9 million) or
$(0.07) loss per share reported in the second quarter of 2009.
- On a non-GAAP basis (excluding
stock-based compensation expenses and strategic alliance related
expenses), net loss was $(5.3 million) or $(0.12) loss per share,
as compared to $(4.3 million) or $(0.09) for the preceding quarter
and a $(1.9 million) or $(0.04) reported in the second quarter of
2009.
Update Concerning Proposed Merger with Dialogic
As stated in a press release issued on August 9, 2010, Veraz
filed with the Securities and Exchange Commission a definitive
proxy statement (Form DEF 14A) relating to the proposed merger with
privately held Dialogic Corporation, a leading worldwide provider
of technologies that enable its customers and partners to deliver
innovative mobile, video, IP and TDM solutions for network service
providers and enterprise communication networks. Veraz has
scheduled a special meeting of Veraz shareholders on Thursday,
September 30, 2010 at 9:00 am at Veraz Networks, 926 Rock Avenue,
San Jose, CA 95131.
For further information regarding the arrangement to merge the
two companies and other important information, interested parties
should refer to the DEF 14A filed by Veraz on August 5, 2010. The
transaction is expected to close in October, 2010, subject to
obtaining all requisite approvals, shareholder approvals, and
customary closing conditions. For further information concerning
the selected financial results of Dialogic for the quarter ending
June 30, 2010, please see our Quarterly report on Form 10-Q for the
quarter ended June 30, 2010, to be filed on August 16, 2010.
Conference Call Information
Veraz will offer a live webcast and conference call on August
12, 2010 at 4:30 p.m. EST, which will also include forward-looking
information. For parties in the United States and Canada, call
1-800-860-2442 to access the conference call. International parties
can access the call at +1-412-858-4600. The webcast will be
accessible from the "Investor Relations" section of the Veraz
website (www.veraznetworks.com). The webcast will
be archived for a period of 30 days. A telephonic replay of the
conference call will also be available two hours after the call and
will run for one month. To hear the replay, parties in the United
States and Canada should call 1-877-344-7529 and enter passcode
60000#. International parties should call +1-412-317-0088 and enter
passcode 60000#. In addition, Veraz's press release will be
distributed via Business Wire and posted on the Veraz website
before the conference call begins.
About Veraz Networks
Veraz Networks, Inc. (NASDAQ: VRAZ), is the leading provider of
application, control, and bandwidth optimization products that
enable the evolution to the Multimedia Generation Network (MGN).
Service providers worldwide use the Veraz MGN portfolio to extend
their current application suite and rapidly add customized
multimedia services that drive revenue and ensure customer
retention. The Veraz MGN separates the control, media, and
application layers while unifying management of the network,
thereby increasing service provider operating efficiency. Wireline
and wireless service providers in over 80 countries have deployed
products from the Veraz MGN portfolio, which includes the
ControlSwitch(TM), Network-adaptive Border Controller, I-Gate 4000
Media Gateways, the VerazView Management System, and a set of
prepackaged applications. For more information regarding the
Company, please visit www.veraznetworks.com.
About Dialogic
Dialogic Corporation is a leading provider of world-class,
innovative technologies based on open standards that enable
innovative mobile, video, IP, and TDM solutions for Network Service
Providers and Enterprise Communication Networks. Dialogic's
customers and partners rely on its leading-edge, flexible
components to rapidly deploy value-added solutions around the
world.
Information about Dialogic is available at
http://www.dialogic.com/. Dialogic is a registered trademark of
Dialogic Corporation.
Additional Information about the Proposed Merger and Where
You Can Find It
Veraz filed a definitive proxy statement with the Securities and
Exchange Commission on August 5, 2010 in connection with a special
meeting of stockholders of Veraz to be held on September 30, 2010
for the purpose of voting on: the adoption of the Acquisition
Agreement, dated as of May 12, 2010, by and between Veraz and
Dialogic, an amendment to Veraz's certificate of incorporation to
effect a reverse stock split of the issued and outstanding shares
of Veraz's common stock, to be effective upon the consummation of
the Arrangement or such other time as determined by Veraz's board
of directors, an amendment to Veraz's certificate of incorporation
to change the name of Veraz from "Veraz Networks, Inc." to
"Dialogic Inc.," to be effective upon the consummation of the
Arrangement, and the adjournment of the special meeting, if
necessary, to solicit additional proxies if there are not
sufficient votes at the time of the meeting in favor of the other
proposals. BEFORE MAKING ANY VOTING DECISION WITH RESPECT TO THE
PROPOSED TRANSACTION, SECURITY HOLDERS ARE URGED TO READ THE PROXY
STATEMENT AND OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. The proxy statement and other relevant materials, and
any other documents filed by Veraz with the SEC, may be obtained
free of charge at the SEC's website at www.sec.gov. In addition,
stockholders of Veraz may obtain free copies of the documents filed
with the SEC by contacting Veraz's Investor Relations department at
(408) 750-9400 or Investor Relations, Veraz Networks, Inc., 926
Rock Avenue, Suite 20, San Jose, California 95131. You may also
read and copy any reports, statements and other information filed
by Veraz with the SEC at the SEC public reference room at 100 F
Street, NE, Room 1580, Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 or visit the SEC's website for further
information on its public reference room.
Veraz and its executive officers and directors may be deemed to
be participants in the solicitation of proxies from the
stockholders of Veraz in favor of the proposed transaction. A list
of the names of Veraz's executive officers and directors, and a
description of their respective interests in Veraz, are set forth
in the definitive proxy statement for Veraz's Special Meeting of
Stockholders, which was filed with the SEC on August 5, 2010, and
in any documents subsequently filed by its directors and executive
officers under the Securities and Exchange Act of 1934, as
amended.
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.
Veraz believes that presenting non-GAAP net loss and non-GAAP net
loss allocable to common stockholders is useful to investors,
because it describes the operating performance of Veraz. Veraz
management uses these non-GAAP measures as important indicators of
the company's past performance and in planning and forecasting
performance in future periods. The non-GAAP financial information
Veraz 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 non-GAAP financial
measures to GAAP financial measures included elsewhere in this
press release.
In respect of the foregoing, Veraz 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:
Stock-based compensation. These expenses consist of expenses for
employee stock options, restricted stock units and employee stock
purchases under ASC 718. Veraz excludes stock-based compensation
expenses from our non-GAAP measures primarily because they are
non-cash expenses. As Veraz applies ASC 718, it believes that it is
useful to its investors to understand the impact of the application
of ASC 718 to its operational performance, liquidity and its
ability to invest in research and development and fund acquisitions
and capital expenditures. While stock-based compensation expense
calculated in accordance with ASC 718 constitutes an ongoing and
recurring expense, such expense is excluded from non-GAAP results
because it is not an expense that typically requires or will
require cash settlement by Veraz and because such expense is not
used by management to assess the core profitability of our business
operations. Veraz further believes these measures are useful to
investors in that they allow for greater transparency to certain
line items in our financial statements. In addition, excluding this
item from various non-GAAP measures better facilitates comparisons
to our competitors' operating results.
Strategic alliance related expenses. These expenses pertain to
our strategic alliance expense with Dialogic Corporation, which we
generally would not have otherwise incurred in the periods
presented as a part of our continuing operations. Strategic
alliance related costs consist of consulting related costs for
legal, accounting and banking advice.
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,
statements regarding the economic environment, our customers
expansion plans, the demand for mobile voice and data services 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 Veraz' business is set forth in the
"Risk Factors" section in our Annual Report on Form 10-K for the
year ended December 31, 2009 and our Quarterly report on Form 10-Q
for the quarter ended March 31, 2010, each 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.
A copy of this press release can be found on the investor
relations page of Veraz' website at www.veraznetworks.com. (VRAZ
-IR)
Veraz Networks, Veraz, and ControlSwitch are registered
trademarks of Veraz Networks, Inc. All other company and product
names may be trademarks of the respective companies with which they
are associated.
VERAZ NETWORKS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (In thousands,
unaudited) June 30, 2010 December 31,
2009 ASSETS Current assets: Cash and cash
equivalents $ 29,500 $ 25,095 Restricted cash 892 608 Short-term
investments 193 7,899 Accounts receivable, net 21,412 29,959
Inventories 10,049 8,364 Prepaid expenses 1,996 1,718 Other current
assets 3,046 3,113 Due from related parties 185
686 Total current assets 67,273 77,442
Property and equipment, net 2,431 3,149 Other assets 112
120
Total assets
$ 69,816 $ 80,711
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts
payable $ 6,498 $ 6,375 Accrued expenses 10,626 11,493 Income tax
payable 641 1,173 Deferred revenue 14,489 14,112 Due to related
parties 1,469 1,117 Total current
liabilities 33,723 34,270
Stockholders’ equity: Common stock and additional paid-in-capital
134,389 133,128 Accumulated other comprehensive income 2,004 2,124
Accumulated deficit (100,300 ) (88,811 ) Total
stockholders’ equity 36,093 46,441
Total liabilities and stockholders’ equity $ 69,816 $
80,711
VERAZ NETWORKS, INC AND SUBSIDIARIES
Condensed Consolidated Statements of
Operations (In thousands, except per share data,
unaudited) Three Months Ended
June 30,
Six Months Ended
June 30,
2010 2009 2010 2009
Revenues: IP Products $ 7,500 $ 9,955 $ 15,686 $ 23,005 DCME
Products 189 710 1,423 1,908 Services 7,015
6,155 13,665 12,858
Total
revenues 14,704 16,820
30,774 37,771
Cost of Revenues:
IP Products 2,923 4,517 6,315 9,951 DCME Products 85 245 556 732
Services 3,383 2,961 6,667
5,849
Total cost of revenues
6,391 7,723 13,538 16,532
Gross profit 8,313
9,097 17,236 21,239
Operating Expenses: Research and development,
net 4,648 4,343 9,716 9,551 Sales and marketing 4,304 5,637 9,978
12,167 General and administrative 5,094 2,967
8,345 5,775
Total operating
expenses 14,046 12,947
28,039 27,493
Loss from
operations (5,733 ) (3,850 ) (10,803 ) (6,254 ) Other income
(expense), net (453 ) 682 (405 )
148
Loss before income taxes (6,186 ) (3,168 )
(11,208 ) (6,106 ) Income taxes provision (benefit) 58
(243 ) 281 (173 )
Net loss
allocable to common stockholders $ (6,244
) $ (2,925 ) $ (11,489
) $ (5,933 ) Net loss
allocable to common stockholders per share - basic and diluted
$ (0.14 ) $ (0.07 )
$ (0.26 ) $ (0.14 )
Weighted-average shares outstanding used in computing net
loss per share -- basic and diluted: 44,242
43,390 44,143 43,278
VERAZ
NETWORKS, INC AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP results (In thousands,
except per share data, unaudited) Three Months
Ended
June 30,
Six Months Ended
June 30,
2010 2009 2010 2009 Reported
net loss (GAAP basis) $ (6,244 ) $
(2,925 ) $ (11,489 ) $
(5,933 ) Non-GAAP adjustment Stock based
compensation (1) 537 1,052 1,245 2,204 Strategic alliance expenses
(2) 452 - 730 -
Non-GAAP net loss $ (5,255 )
$ (1,873 ) $ (9,514 )
$ (3,729 ) Weighted-average shares
outstanding used in computing net loss -- basic and diluted: (for
Non-GAAP) 44,242 43,390 44,143
43,278
Reported net loss per
share - basic and diluted (GAAP basis) $ (0.14
) $ (0.07 ) $ (0.26
) $ (0.14 ) Stock based compensation
(1) 0.01 0.03 0.02 0.05 Strategic alliance expenses (2) 0.01
- 0.02 -
Non-GAAP net loss per share - basic and diluted $
(0.12 ) $ (0.04 ) $
(0.22 ) $ (0.09 )
(1) Stock based compensation for the three and six months ended
June 30, 2010 and 2009 , was as follows: Three Months
Ended
June 30,
Six Months Ended
June 30,
2010 2009 2010 2009 Cost of revenues $
124 $ 246 $ 300 $ 507 Research and development, net 160 360 385 742
Sales and marketing 154 278 335 582 General and administrative
99 168 225 373
$ 537 $ 1,052 $ 1,245 $ 2,204
(2) Strategic alliance related expenses for the
three and six months ended June 30, 2010 and 2009, was as
follows: Three Months Ended
June 30,
Six Months Ended
June 30,
2010 2009 2010 2009 General and
administrative $ 452 $ - $ 730 $ -
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