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TMCNet:  Mavenir Systems® Reports 2014 Second Quarter Financial Results

[July 28, 2014]

Mavenir Systems® Reports 2014 Second Quarter Financial Results

RICHARDSON, Texas --(Business Wire)--

Mavenir Systems (NYSE: MVNR) today reported financial results for the second quarter 2014, provided its outlook for the third quarter and updated its outlook for the full year of 2014.

Total revenue for the second quarter of 2014 was $33.3 million, an increase of 29% year-over-year and 16% quarter-over-quarter. GAAP operating loss for the second quarter of 2014 was $(2.2) million, compared with $(0.9) million in the second quarter of 2013 and $(2.2) million in the first quarter of 2014. Non-GAAP operating income, which excludes stock-based compensation, foreign exchange gains or losses, depreciation and amortization, was $0.1 million for the second quarter of 2014, compared to $0.2 million for the second quarter of 2013 and a loss of $(0.2) million for the first quarter of 2014. GAAP net loss for the second quarter of 2014 was $(3.9) million, compared to $(3.6) million in the second quarter of 2013 and $(4.0) million for the first quarter of 2014. Non-GAAP net loss for the second quarter of 2014 was $(1.0) million, compared to $(1.6) million for the second quarter of 2013 and $(1.1) million for the first quarter of 2014.

GAAP gross profit margin was 55% in the quarter, compared to 52% in the second quarter of 2013 and 56% in the first quarter of 2014. Non-GAAP gross profit margin was 57% in the quarter, above the high end of the guidance range provided in our earnings release for the first quarter of 2014, compared to 53% in the second quarter of 2013 and 57% in the first quarter of 2014.

Net loss per share was $(0.16) for the second quarter of 2014 compared with $(2.72) for the second quarter of 2013 and $(0.17) for the first quarter of 2014. As outlined in the accompanying table entitled "Non-GAAP Net Loss Per Share" included in this press release, the non-GAAP net loss per share was $(0.04) for the second quarter of 2014 compared to $(0.09) for the second quarter of 2013 and $(0.05) for the first quarter of 2014.

A description of the non-GAAP calculations and reconciliation to comparable GAAP measures is provided in the accompanying table entitled "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures."

"We achieved a number of financial and business milestones again this quarter. The company delivered a strong quarter with strong financial results, again setting a new quarterly revenue record with Gross Margin above the high end of our guidance range," said Pardeep Kohli, president and chief executive officer, Mavenir Systems. "Mavenir is seeing momentum in our two major areas of focus that are driving mobile network transformation - the adoption of all-IP technology and the build out of next generation networks using software-based solutions. LTE network transformation has begun in key markets with several VoLTE launches and announcements in the second quarter indicating that 2014 is the year of VoLTE."

Mavenir Second Quarter 2014 Business and Financial Highlights

  • Record quarterly revenue of $33.3 million, an increase of 29% year-over-year;
  • Added two Tier 1 operators to our customer list for next-generation solutions;
  • Expanded end-to-end portfolio of 4G LTE core networking solutions with announcement of evolved Packet Data Gateway;
  • Expanded software-based voice and video solution set with client provisioning server to enable Voice over Wi-Fi and Rich Communication Services;
  • Received key industry awards for our Network Functions Virtualization (NFV) solution, Voice over LTE Leadership and Innovation and Best RCS.

Guidance

Mavenir is providing the following third quarter and updated full year 2014 guidance with respect to anticipated total revenue, non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per share.

Third quarter of 2014

  • Revenue to range from $31.0 million to $33.0 million, reflecting growth of 19% to 27% over the third quarter of 2013.
  • Non-GAAP gross margin to range from 51% to 53%.
  • Non-GAAP operating loss to range from $(3.5) million to $(2.5) million.
  • Non-GAAP net loss to range from $(4.4) million to $(3.4) million.
  • Non-GAAP net loss per share ranging from $(0.16) to $(0.12) (based on a forecasted weighted average number of shares outstanding of 27,350,000).

Full year 2014

  • Revenue is increased to a range from $127 million to $130 million, reflecting growth of 25% to 28% year-over-year.
  • Non-GAAP gross margin to range from 57% to 59%.
  • Non-GAAP operating income is expected to be at approximately a break-even level.

Conference Call

Mavenir will discuss its second quarter 2014 results and its business outlook via teleconference today at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). To access this call, investors can dial the toll free number 1-855-302-8830 (domestic) or 1-330-871-6073 with the ID#64789401, or access a live webcast of the conference call at Mavenir's website http://investor.mavenir.com.

A replay will be available following the call on Mavenir Systems' Investor Relations website and for one week at the following numbers: 855-859-2056 (domestic) or 404-537-3406 (international) with ID# 64789401.

Non-GAAP Financial Measures & Definitions

In addition to disclosing financial results that are determined in accordance with U.S. GAAP, Mavenir discloses non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per share, which are non-GAAP financial measures, as supplemental measures. Non-GAAP operating loss represents operating loss before depreciation, amortization and stock-based compensation. Non-GAAP net loss represents non-GAAP operating loss after interest and taxes, as adjusted for uncertain tax positions component. Non-GAAP net loss per share represents non-GAAP net loss divided by our adjusted weighted average common shares outstanding, which assumes the conversion of preferred shares as of the beginning of the period. These measures are used by management to evaluate our business and management believes these measures may help investors evaluate the Company's fundamental operational performance. Management believes these non-GAAP measures facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures, tax position, depreciation, amortization, stock-based compensation expense and certain other expenses. These measures are not measures of our financial performance under U.S. GAAP and should not be considered in isolation or a substitute for net loss, operating loss or other performance measures as determined in accordance with U.S. GAAP. These measures should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. Please refer to the accompanying tables entitled "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" and "Non-GAAP Net Loss Per Share" for a reconciliation of consolidated GAAP operating loss to non-GAAP operating loss, consolidated GAAP net loss to non-GAAP net loss.

In determining our guidance for the second quarter and full year of 2014 set forth in "Guidance," we have chosen to use non-GAAP measures for all metrics other than revenue. The non-GAAP metrics exclude the effects of depreciation, amortization, foreign exchange gains or losses, and stock-based compensation. The effects of these two items are difficult to forecast in advance as they relate to future foreign exchange rates and future stock prices, which are subject to external factors that are difficult to predict. As a result, Mavenir does not give guidance on GAAP metrics other than revenue.

Forward-Looking Statements

Statements in this press release that are not purely historical facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include the statements under "Guidance" above, statements regarding Mavenir's expectations with respect to revenue, non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per share, as well as statements about transformation of mobile networks by mobile service providers, their transition to all-IP technology and software-based solutions and Mavenir's views about its ability to deliver solutions that enable this transformation and transition. Forward-looking statements can generally be identified by words such as "anticipates," "may," "can," "believes," "expects," "projects," "intends," "likely," "target," "will," "to be" and other expressions that are predictions or indicate future events, trends or prospects, although not all forward-looking statements contain these identifying words. These forward-looking statements represent management's current expectations and involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Mavenir to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Accordingly, investors should not place undue reliance on these forward-looking statements.

Factors that could cause actual results to differ materially from those indicated by the forward-looking statements include risks regarding the timing of the adoption of 4G by mobile service providers around the world; mobile service providers' investment in next-generation communications technology; our ability to sell solutions to mobile service providers, particularly those serving large numbers of customers; the length and variability of the sales cycles for our solutions; actions taken by our competitors; our ability to negotiate acceptable financial terms with our mobile service provider customers; the performance of our solutions when implemented in mobile service provider networks; management's ability to accurately forecast Mavenir's financial results; the timing of revenues and the application of complex revenue recognition rules to such revenues; prolonged negative economic conditions in domestic and global markets; and other factors described in our filings with the Securities and Exchange Commission ("the SEC"), including under the caption "Risk Factors" and elsewhere in our annual report on Form 10-K for the year ended December 31, 2013 and in Mavenir's other SEC filings.�There is no assurance that Mavenir's expectations will be realized. If one or more of these risks or uncertainties materialize, or if Mavenir's underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated or projected. The statements in this press release are made as of the date of this press release, even though this press release is made available on Mavenir's website or otherwise. Mavenir does not assume any obligation to update the forward-looking statements provided herein to reflect events that occur or circumstances that exist after the date on which the forward-looking statements were made, except as required by law.

About Mavenir Systems:

Mavenir Systems (NYSE: MVNR) provides software-based networking solutions that enable mobile service providers to deliver next generation services over 4G LTE networks. Mavenir™ has a fully virtualized end to end portfolio of Voice/Video, Messaging and Mobile Core products that include IP Multimedia Subsystem (IMS), Evolved Packet Core (EPC) and Session Border Controller (SBC). Mavenir's solutions, based on the award-winning mOne® software platform, leverage NFV and SDN technologies for deployments on cloud-based infrastructure.

www.mavenir.com

© 2014 Mavenir Systems, Inc. All rights reserved.

Mavenir Systems®, mOne®, AirMessenger®, Mavenir™, mStore™, mCloud™, and Transforming Mobile Networks™ are trademarks of Mavenir Systems, Inc.



Mavenir Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
(unaudited)

Three months ended
June 30,

Three
months
ended
March 31,

Six months ended

June 30,

2014 2013 2014 2014 2013
Revenues
Software products $ 27,155 $ 19,537 $ 23,037 $ 50,192 $ 37,264
Maintenance 6,132 6,215 5,692 11,824 10,926
33,287 25,752 28,729 62,016 48,190
Cost of revenues
Software products 11,912 10,763 9,953 21,865 17,414
Maintenance 2,943 1,497 2,744 5,687 2,827
14,855 12,260 12,697 27,552 20,241
Gross profit 18,432 13,492 16,032 34,464 27,949
55.4 % 52.4 % 55.8 % 55.6 % 58.0 %
Operating expenses:
Research and development 7,190 5,376 6,133 13,323 11,498
Sales and marketing 8,228 4,615 6,871 15,099 9,656
General and administrative 5,244 4,370 5,250 10,494 9,361
Total operating expenses 20,662 14,361 18,254 38,916 30,515
Operating loss (2,230 ) (869 ) (2,222 ) (4,452 ) (2,566 )
Other expense (income):
Interest income (18 ) (3 ) (43 ) (61 ) (8 )
Interest expense 425 665 783 1,208 1,115
Loss on early extinguishment of debt - - 1,783 1,783 -
Foreign exchange (gain) loss 849 912 (795 ) 54 2,644
Total other expense (income), net 1,256 1,574 1,728 2,984 3,751
Loss before income tax (3,486 ) (2,443 ) (3,950 ) (7,436 ) (6,317 )
Income tax expense 405 1,198 95 500 1,618
Net loss $ (3,891 ) $ (3,641 ) $ (4,045 ) $ (7,936 ) $ (7,935 )
Other comprehensive income (loss)
Foreign currency translation adjustments 776 (70 ) (815 ) (39 ) (102 )
Total comprehensive loss $ (3,115 ) $ (3,711 ) $ (4,860 ) $ (7,975 ) $ (8,037 )
Net loss per common share:
Basic $ (0.16 ) $ (2.72 ) $ (0.17 ) $ (0.33 ) $ (5.93 )
Diluted $ (0.16 ) $ (2.72 ) $ (0.17 ) $ (0.33 ) $ (5.93 )
Weighted average common shares outstanding:
Basic and diluted 24,171 1,341 23,430 23,800 1,339
� � Mavenir Systems, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except share and per share amounts) (unaudited) � � June 30, 2014

December 31,
2013

Assets: � Current assets: Cash and cash equivalents $ 24,772 $ 38,930 Accounts receivable, net of allowance of $235 and $587 at June 30, 2014 and December 31, 2013, respectively 29,683 23,641 Unbilled revenue 13,418 11,213 Inventories 3,633 7,109 Prepaid expenses and other current assets 3,742 3,614 Deferred contract costs � 5,955 � � 9,313 � Total current assets 81,203 93,820 Non-current assets: Property and equipment, net 5,849 5,054 Intangible assets, net 4,890 5,202 Deposits and other assets 1,350 1,657 Goodwill � 870 � � 866 � Total assets $ 94,162 � $ 106,599 � � Liabilities and shareholders' equity: � Current liabilities: Trade accounts payable $ 4,066 $ 7,152 Accrued liabilities 11,435 11,939 Deferred revenue 11,351 15,785 Income tax payable 483 765 Current portion of debt � 1,563 � � - � Total current liabilities 28,898 35,641 Non-current liabilities: Uncertain tax positions 2,823 3,153 Other long-term liabilities 431 351 Long-term debt � 23,365 � � 23,423 � Total liabilities � 55,517 � � 62,568 � � Commitments and contingencies � Shareholders' equity: Common stock, $0.001 par value. 300,000,000 shares authorized; 24,659,338 and 23,420,59 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively 24 23 Additional paid-in capital 157,786 155,198 Accumulated deficit (120,123 ) (112,187 ) Accumulated other comprehensive income � 958 � � 997 � Total shareholders' equity � 38,645 � � 44,031 � Total liabilities and shareholders' equity $ 94,162 � $ 106,599 �
� � Mavenir Systems, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) � � Six months ended June 30,2014 � � 2013 � � Operating activities: Net loss $ (7,936 ) $ (7,935 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property and equipment 1,634 1,082 Amortization of intangible assets 975 712 Amortization of debt discount 108 87 Net change in allowance for doubtful accounts (312 ) 301 Stock-based compensation expense 1,714 300 Unrealized foreign currency gain (1,437 ) 955 Loss on early extinguishment of debt 1,783 - Changes in operating assets and liabilities: Accounts receivable (5,536 ) (4,416 ) Unbilled revenue (1,976 ) 2,072 Deposits and other current assets (189 ) (146 ) Inventories 3,475 (1,712 ) Prepaid expenses 111 (1,806 ) Deferred contract costs 3,469 (2,791 ) Deferred revenue (4,596 ) 1,346 Accounts payable and accrued liabilities � (4,204 ) � 1,776 � Net cash used in operating activities � (12,917 ) � (10,175 ) Investing activities: Purchases of property and equipment � (3,018 ) � (1,413 ) Net cash used in investing activities � (3,018 ) � (1,413 ) Financing activities: Borrowing from long-term debt 25,000 15,000 Borrowing from line of credit - 12,000 Repayments of long-term debt (15,000 ) (2,000 ) Repayments of line of credit borrowing (10,000 ) - Exercise of options and warrants to purchase common stock � 873 � � 7 � Net cash provided by financing activities � 873 � � 25,007 � Effect of foreign currency exchange rate changes on cash and cash equivalents � 904 � � (368 ) Net (decrease) increase in cash and cash equivalents (14,158 ) 13,051 Cash and cash equivalents at beginning of period � 38,930 � � 7,402 � Cash and cash equivalents at end of period $ 24,772 � $ 20,453 � � Supplemental cash flow information: Cash paid for interest $ 1,196 � $ 771 � Income tax payments, net $ 378 � $ 136 �
� � � � � Mavenir Systems, Inc. and Subsidiaries Revenue Metrics (in thousands) (unaudited) � � �

Three Months ended
June 30,

Three months
ended March
31,

Six Months ended
June 30,

2014 2013 2014 2014 2013Revenue by type: Software products $ 27,155 $ 19,537 $ 23,037 $ 50,192 $ 37,264 Maintenance � 6,132 � 6,215 � 5,692 � 11,824 � 10,926 Total $ 33,287 $ 25,752 $ 28,729 $ 62,016 $ 48,190 � Revenue by Product Group: Video/Voice $ 20,259 $ 9,511 $ 22,611 $ 42,870 $ 14,840 Enhanced Messaging � 13,028 � 16,241 � 6,118 � 19,146 � 33,350 Total $ 33,287 $ 25,752 $ 28,729 $ 62,016 $ 48,190 � Revenue by Geographic Area: Americas $ 19,676 $ 12,906 $ 13,635 $ 33,311 $ 21,336 EMEA 9,375 10,057 12,422 21,797 17,596 APAC � 4,236 � 2,789 � 2,672 � 6,908 � 9,258 Total $ 33,287 $ 25,752 $ 28,729 $ 62,016 $ 48,190
� � � Mavenir Systems, Inc. and Subsidiaries Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (in thousands) (unaudited) � � � �

Three Months Ended
June 30,

Three Months
Ended March
31,

Six Months Ended
June 30,

2014 � � 2013 � � 2014 � � 2014 � � 2013 � � Software Products Revenue $ 27,155 $ 19,537 $ 23,037 $ 50,192 $ 37,264 Cost of Revenue 11,912 10,763 9,953 21,865 17,414 Amortization and Depreciation 242 126 234 476 242 Stock Based Compensation 132 - 78 210 - Gross Profit (GAAP) 15,243 8,774 13,084 28,327 19,850 Gross Profit (Non-GAAP) 15,617 8,900 13,396 29,013 20,092 � Maintenance Revenue 6,132 6,215 5,692 11,824 10,926 Cost of Revenue 2,943 1,497 2,744 5,687 2,827 Gross Profit (GAAP) 3,189 4,718 2,948 6,137 8,099 Gross Profit (Non-GAAP) 3,189 4,718 2,948 6,137 8,099 � Total Revenue 33,287 25,752 28,729 62,016 48,190 Total Gross Profit (GAAP) 18,432 13,492 16,032 34,464 27,949 Gross Profit Margin % (GAAP) 55.4 % 52.4 % 55.8 % 55.6 % 58.0 % Gross Profit (Non-GAAP) 18,806 13,618 16,344 35,150 28,191 Gross Profit Margin % (Non-GAAP) 56.5 % 52.9 % 56.9 % 56.7 % 58.5 % � Operations Expenses R&D (GAAP) 7,190 5,376 6,133 13,323 11,498 Amortization and Depreciation 483 260 574 1,057 493 Stock Based Compensation � 220 � � - � � 98 � � 318 � � - � R&D (Non-GAAP) 6,487 5,116 5,461 11,948 11,005 � S&M (GAAP) 8,228 4,615 6,871 15,099 9,656 Amortization and Depreciation - - - - - Stock Based Compensation � 277 � � - � � 130 � � 407 � � - � S&M (Non-GAAP) 7,951 4,615 6,741 14,692 9,656 � G&A (GAAP) 5,244 4,370 5,250 10,494 9,361 Amortization and Depreciation 521 567 556 1,077 1,059 Stock Based Compensation � 468 � � 136 � � 311 � � 779 � � 300 � G&A (Non-GAAP) 4,255 3,667 4,383 8,638 8,002 � Total Operating Expenses (GAAP) 20,662 14,361 18,254 38,916 30,515 Operating Expenses (Non-GAAP) 18,693 13,398 16,585 35,278 28,663 � Operating Loss (GAAP) $ (2,230 ) $ (869 ) $ (2,222 ) $ (4,452 ) $ (2,566 ) Net Interest 407 662 740 1,147 1,107 Loss on early extinguishment of debt - - 1,783 1,783 - Foreign exchange (gain)/loss 849 912 (795 ) 54 2,644 Income Taxes � 405 � � 1,198 � � 95 � � 500 � � 1,618 � Net Loss (GAAP) $ (3,891 ) $ (3,641 ) $ (4,045 ) $ (7,936 ) $ (7,935 ) � Operating Income (Loss) (Non-GAAP) $ 113 $ 220 $ (241 ) $ (128 ) $ (472 ) Net Interest 407 662 740 1,147 1,107 Income Taxes 405 1,198 95 500 1,618 Adjusted for Uncertain Tax Positions Component � 286 � � - � � - � � 286 � � - � Net Loss (Non-GAAP) $ (985 ) $ (1,640 ) $ (1,076 ) $ (2,061 ) $ (3,197 )
� � � � � Mavenir Systems, Inc. and Subsidiaries Non-GAAP Net Loss Per Share

(In thousands, except share and per share data)

(Unaudited) � �

Three months ended June 30,

Three
months ended
March 31,

Six months ended June 30,

2014 � � 2013 � � 2014 � � 2014 � � 2013 � � GAAP weighted average common shares outstanding 24,170,641 1,340,710 23,429,820 23,800,231 1,338,211 Conversion of preferred shares * � - � � 16,452,467 � � - � � - � � 16,452,467 � Adjusted weighted average common shares outstanding 24,170,641 17,793,177 23,429,820 23,800,231 17,790,678 � Non-GAAP net loss $ (985 ) $ (1,640 ) $ (1,076 ) $ (2,061 ) $ (3,197 ) � Non-GAAP net loss per share $ (0.04 ) $ (0.09 ) $ (0.05 ) $ (0.09 ) $ (0.18 ) � * Assumes conversion of preferred shares at beginning of period


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