-- Revenues of $116.0 million; down 1% year over year
-- Gross Margin of 65%, and non-GAAP Gross Margin of 67% (as reconciled below)
-- Operating Margin of 19%, and non-GAAP Operating Margin of 24% (as reconciled below)
-- Diluted EPS of $0.20 per shar
MORRISVILLE, NC, May 6, 2010 (Marketwire) --
MORRISVILLE, NC -- (Marketwire) -- 05/06/10 -- Tekelec (NASDAQ: TKLC), the session and mobile data management company, today announced earnings for the first quarter of 2010.
2010 First Quarter Results from Operations
Revenue for the first quarter of 2010 was $116.0 million, down 1% compared to $116.7 million for the first quarter of 2009. The Company had orders of $56.7 million for the quarter, down 17% from the first quarter of 2009. Orders in the first quarter of 2010 were adversely impacted in part by new regulations in India, which require equipment suppliers receive a security clearance from the Indian government prior to receiving purchase orders from telecommunications carriers. These new regulations resulted in the delay of approximately $10 million of orders. We expect to receive these orders during the second quarter of 2010. As of March 31, 2010, backlog was $308.4 million compared to $373.6 million as of December 31, 2009 and $359.3 million as of March 31, 2009.
Gross margins for the first quarter of 2010 were 65%, compared with 64% in the first quarter of 2009. Non-GAAP gross margins for the first quarter of 2010 increased to 67%, up from 66% for the first quarter of 2009. Please refer to the attached reconciliation of the non-GAAP financial measures referred to in this release to the most directly comparable GAAP measures.
The Company reported net income for the first quarter of 2010 of $13.7 million, or $0.20 per diluted share, with earnings per share up 11% compared to $12.4 million, or $0.18 per diluted share, for the first quarter of 2009. Operating margins were 19% for the first quarter of 2010 up from 15% for the first quarter of 2009.
On a non-GAAP basis, net income for the first quarter of 2010 was $18.0 million, or $0.26 per diluted share, with earnings per share up 8% compared to $16.0 million, or $0.24 per diluted share, for the first quarter of 2009. Non-GAAP operating margins for the first quarter of 2010 were 24%, up from 20% for the first quarter of 2009.
In October 2009, the Financial Accounting Standards Board issued new accounting guidance related to revenue recognition. Tekelec elected to adopt this accounting guidance early on a prospective basis for transactions originating or materially modified on or after January 1, 2010. The impact to revenues of the adoption of these rules was not material for the quarter. Based on the currently available information, we anticipate that the impact of this revenue recognition guidance on the full year revenues for 2010 will also not be material.
Balance Sheet and Liquidity
As of March 31, 2010, the Company's consolidated cash and cash equivalents totaled $307.3 million, compared to $277.3 million at December 31, 2009. In addition, the Company held $79.5 million of auction rate securities and associated put rights for which it has entered into a settlement agreement with UBS providing the Company with a right to require UBS to repurchase such securities as of June 30, 2010. Cash flows from continuing operations were $14.9 million for the first quarter of 2010, compared to $21.8 million for the first quarter of 2009. Working capital at March 31, 2010 was $463.6 million, compared to $441.3 million at December 31, 2009.
2010 Full Year Guidance
Please refer to attached financial statement schedules for more information related to our 2010 guidance.
"Live" Webcast and Replay
Tekelec will host a live webcast of its conference call on Thursday, May 6, 2010, at 8:00 a.m. EDT for its management to discuss first quarter 2010 results and certain forward-looking information concerning management's outlook for the business. To access the webcast, visit Tekelec's web site located at www.tekelec.com, enter the Investor Relations section and click on the webcast icon. A webcast replay will be available at approximately 11:00 a.m. EDT on Thursday, May 6, 2010, and for 90 days thereafter. The Company also plans to provide on its web site prior to the commencement of the call certain GAAP and non-GAAP information (including GAAP to non-GAAP reconciliations) for the quarterly periods.
Telephone Replay
A telephone replay of the call will also be available for one week after the live webcast by calling either (800) 642-1687 or (706) 645-9291, and entering the conference ID #67727325.
Non-GAAP Information
Certain non-GAAP financial measures are included in this press release. In the calculation of these measures, Tekelec generally excludes certain items such as amortization of acquired intangibles, restructuring and other charges, non-cash stock-based compensation charges, and unusual, non-recurring gains and charges. Tekelec believes that excluding such items provides investors and management with a representation of the Company's core operating performance and with information useful in assessing its prospects for the future and underlying trends in Tekelec's operating expenditures and continuing operations. Management uses such non-GAAP measures to (i) evaluate financial results, (ii) manage the Company's operations, and (iii) establish operational goals. Further, each of the individual non-GAAP measures are utilized by the Company's management and board of directors to assist in determining incentive compensation and evaluating key trends within the business. In addition, since the Company has historically reported non-GAAP measures to the investment community, the Company believes the inclusion of this information provides consistency in our financial reporting. The release and the attachments to this release provide a reconciliation of each of the non-GAAP measures referred to in this release to the most directly comparable GAAP measure. The non-GAAP financial measures are not meant to be considered a substitute for the corresponding GAAP financial measures.
Forward-Looking Statements
Certain statements made in this press release are forward-looking, reflect the Company's current intent, belief or expectations and involve certain risks and uncertainties. The Company's actual future performance may differ materially from such expectations as a result of important risk factors, which include, in addition to those identified in the Company's 2009 Form 10-K, 2010 First Quarter Form 10-Q and its other filings with the Securities and Exchange Commission, the current or further detrimental changes in general economic, social, or political conditions in the countries in which we operate including the impact of credit availability and currency fluctuations on overall capital spending by our customers, our ability to integrate and gain the benefits we expect from the acquisition of Blueslice and the planned acquisition of Camiant announced today and our ability to close the acquisition of Camiant on a timely basis, the timeliness and functional competitiveness of our product releases, the risk of infringing and litigating with others regarding their intellectual property rights, the timing of our recognition of revenues, any failure by UBS to fulfill its obligation to repurchase the Company's auction rate securities upon exercise of the Company's put rights in June 2010, the extent to which any customer outsourcing to our competitors or supplier consolidation increases the influence of competitors on our customers' purchases, our ability to compete with other manufacturers that have lower cost bases than ours and/or are partially supported by foreign governments or employ other unfair trade practices, our ability to protect intellectual property rights, our ability to maintain OEM, partner, reseller, and vendor support and supply relationships, and changes in the market price of the Company's common stock. The Company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.
About Tekelec
Tekelec, the session and mobile data management company, enables billions of people and devices to surf, talk, and text. Our solutions allow service providers to dynamically manage network resources and services, while providing end users with a consistent and personalized customer experience. We handle the complexity of today's multi-generational and multi-vendor networks by enabling devices, protocols, services, and databases to securely and efficiently communicate with each other. Tekelec has more than 25 offices around the world serving more than 300 customers in more than 100 countries. For more information, please visit www.tekelec.com.
Full Year 2010 Guidance
Our current view reflects the combined results of Tekelec and the post
acquisition results of our acquisition of Blueslice and planned acquisition
of Camiant announced in a separate press release this morning that can be
found at http://ir.tekelec.com/. Our updated guidance also reflects what we
believe to be continued cautiousness in capital spending in emerging
markets.
For the full year, we expect combined revenues will range between
$465 million and $480 million. This estimate reflects the elimination of
up to an estimated $10 million of deferred revenues from the acquired
companies as a result of purchase accounting. Gross margins are estimated
to be in the mid to high sixty percent range. We expect non-GAAP EPS,
excluding the impact of the above mentioned purchase accounting
adjustments and certain one-time acquisition related items, to range
between $0.95 and $1.10 per share. Including the estimated $0.08 to $0.12
cents per share impact of these items, we expect our non-GAAP range to be
between $0.85 and $1.00 per share. Finally, we expect our book to bill
ratio to be approximately 1 to 1.
One-time
Tekelec and Acquisition
Acquisitions Related 2010
Tekelec Acquisitions Combined Events (1) Guidance
Revenues $455M-$470M $20M $475M-$490M ($10M) $465M-$480M
Non-GAAP
Gross mid to
Margin % high 60's
Non-GAAP
Diluted
EPS $1.00-$1.10 ($0.02-$0.04) $0.95-$1.10 ($0.08-$0.12) $0.85-$1.00
Book to Approximately
Bill Ratio 1 to 1
(1) Under purchase accounting, we estimate we will have to eliminate up to
$10 million of deferred revenue obtained in our acquisitions of Camiant and
Blueslice. Accordingly, our post acquisition revenues and earnings have
been reduced by the impact of this reduction. We also expect to incur
approximately $2 million of post acquisition integration costs related to
the transition of certain administrative functions of Camiant and Blueslice
to our operations in Morrisville, NC.
Note: We have not completed the purchase accounting and related valuation
of the intangible assets associated with the acquisition of Blueslice and
planned acquisition of Camiant. Accordingly, the amount of the one-time
acquisition related items may change. Further, because we have not
completed the valuation of the intangibles obtained in these acquisitions,
we are not in a position to provide full year GAAP EPS guidance at this
time. We expect to complete the purchase accounting during the second
quarter.
TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31, (1)
-------------------------
2010 2009
----------- ------------
(Thousands, except per
share data)
-------------------------
Revenues $ 115,991 $ 116,658
Cost of sales:
Cost of goods sold 38,604 40,349
Amortization of purchased technology 1,533 1,517
----------- ------------
Total cost of sales 40,137 41,866
----------- ------------
Gross profit 75,854 74,792
----------- ------------
Operating expenses:
Research and development 22,809 25,852
Sales and marketing 17,437 17,296
General and administrative 13,150 13,423
Amortization of intangible assets 230 318
----------- ------------
Total operating expenses 53,626 56,889
----------- ------------
Income from operations 22,228 17,903
----------- ------------
Other income (expense), net (945) 11
Income from continuing operations before
provision for income taxes 21,283 17,914
Provision for income taxes 7,565 5,549
----------- ------------
Net income $ 13,718 $ 12,365
=========== ============
Earnings per share:
Basic $ 0.20 $ 0.19
Diluted 0.20 0.18
Weighted average number of shares outstanding:
Basic 67,636 66,285
Diluted 68,766 66,869
(1) We operate under a thirteen-week calendar quarter. For financial
statement presentation purposes, the reporting periods are referred to as
ended on the last day of the calendar quarter. The accompanying Unaudited
Condensed Consolidated Statements of Operations are for the thirteen weeks
ended April 2, 2010 and April 3, 2009.
TEKELEC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,(1) December 31,
----------- ------------
2010 2009
----------- ------------
(Thousands, except share
data)
ASSETS
Current assets:
Cash and cash equivalents $ 307,277 $ 277,259
Trading securities, at fair value 71,008 81,788
Put right, at fair value 8,529 11,069
Accounts receivable, net 135,423 157,369
Inventories 25,974 23,353
Income taxes receivable - 1,617
Deferred income tax asset, current 61,082 66,758
Deferred costs and prepaid commissions 47,637 56,645
Prepaid expenses 5,879 7,007
Other current assets 4,459 1,943
----------- ------------
Total current assets 667,268 684,808
Property and equipment, net 33,266 35,267
Deferred income taxes, net, non current 39,153 39,153
Other assets 1,600 1,661
Goodwill 40,758 42,102
Intangible assets, net 27,988 31,017
----------- ------------
Total assets $ 810,033 $ 834,008
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,433 $ 28,114
Accrued expenses 19,944 25,372
Accrued compensation and related expenses 24,183 40,980
Current portion of deferred revenues 134,004 149,065
Income taxes payable, current 2,145 -
----------- ------------
Total current liabilities 203,709 243,531
Deferred income taxes, non current 4,630 5,477
Long-term portion of deferred revenues 4,889 5,590
Other long-term liabilities 5,016 4,863
----------- ------------
Total liabilities 218,244 259,461
----------- ------------
Commitments and Contingencies
Shareholders' equity:
Common stock, without par value, 200,000,000
shares authorized; 68,154,268
and 67,382,600 shares issued and
outstanding, respectively 338,973 330,909
Retained earnings 255,538 241,820
Accumulated other comprehensive income (loss) (2,722) 1,818
----------- ------------
Total shareholders' equity 591,789 574,547
----------- ------------
Total liabilities and shareholders'
equity $ 810,033 $ 834,008
=========== ============
(1) We operate under a thirteen-week calendar quarter. For financial
statement presentation purposes, the reporting periods are referred to as
ended on the last day of the calendar quarter. The accompanying Unaudited
Condensed Consolidated Balance Sheet is as of April 2, 2010.
TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31, (1)
------------------------
2010 2009
----------- -----------
(Thousands)
Cash flows from operating activities:
Net income $ 13,718 $ 12,365
Adjustments to reconcile net income to net cash
provided by operating activities:
Unrealized gain on ARS portfolio and Put
right, net (80) (1,114)
Provision for/ (recovery of) doubtful
accounts and returns (489) -
Provision for warranty (347) 5,000
Inventory write downs 1,180 810
Loss on disposals of fixed assets 53 51
Depreciation 4,108 4,574
Amortization of intangibles 1,763 1,835
Amortization, other 238 188
Deferred income taxes 4,943 1,014
Stock-based compensation 3,296 3,312
Excess tax benefits from stock-based
compensation (819) (148)
Changes in operating assets and liabilities:
Accounts receivable 21,083 35,857
Inventories (3,866) (3,324)
Deferred costs 8,452 6,706
Prepaid expenses 841 (294)
Other assets (2,455) 855
Accounts payable (4,511) 487
Accrued expenses (4,919) (5,179)
Accrued compensation and related expenses (16,631) (15,639)
Deferred revenues (14,591) (24,132)
Income taxes receivable 1,617 -
Income taxes payable 2,292 (1,401)
----------- -----------
Total adjustments 1,158 9,458
----------- -----------
Net cash provided by operating
activities - continuing operations 14,876 21,823
Net cash used in operating activities
- discontinued operations - (184)
----------- -----------
Net cash provided by operating
activities 14,876 21,639
----------- -----------
Cash flows from investing activities:
Proceeds from sales and maturities of
investments 13,400 4,250
Purchases of property and equipment (2,403) (6,000)
----------- -----------
Net cash provided by (used in)
investing activities 10,997 (1,750)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 7,050 2,368
Payments of net share-settled payroll taxes
related to equity awards (2,282) (1,070)
Excess tax benefits from stock-based
compensation 819 148
----------- -----------
Net cash provided by financing
activities 5,587 1,446
----------- -----------
Effect of exchange rate changes on cash (1,442) 778
----------- -----------
Net change in cash and cash
equivalents 30,018 22,113
Cash and cash equivalents, beginning of period 277,259 209,441
----------- -----------
Cash and cash equivalents, end of period $ 307,277 $ 231,554
=========== ===========
(1) We operate under a thirteen-week calendar quarter. For financial
statement presentation purposes, the reporting periods are referred to
as ended on the last day of the calendar quarter. The accompanying
Unaudited Condensed Consolidated Statements of Cash Flows are for the
thirteen weeks ended April 2, 2010 and April 3, 2009.
TEKELEC
RECONCILIATIONS OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
Three Months Ended March 31, (5)
2010 % of revenues 2009 % of revenues
---------------------------- ----------------------------
(Thousands, except percentages)
Gross margins $ 75,854 65% $ 74,792 64%
Adjustments:
Amortization
of
purchase
technology
(1) 1,533 1% 1,517 1%
Stock Based
Compensation
(2) 352 0% 226 0%
------------- ------------- ------------- -------------
Non-GAAP gross
margins $ 77,739 67% $ 76,535 66%
============= ============= ============= =============
Three Months Ended March 31, (5)
2010 % of revenues 2009 % of revenues
---------------------------- ----------------------------
(Thousands, except percentages)
Operating
margins $ 22,228 19% $ 17,903 15%
Adjustments:
Amortization
of
intangible
assets(1) 1,763 2% 1,835 2%
Stock Based
Compensation
(2) 3,296 3% 3,312 3%
Other (3) 73 0% 220 0%
------------- ------------- ------------- -------------
Non-GAAP
operating
margins $ 27,360 24% $ 23,270 20%
============= ============= ============= =============
Three Months Ended March 31, (5)
per per
2010 diluted share 2009 diluted share
---------------------------- ----------------------------
(Thousands, except per share data)
Net income $ 13,718 $ 0.20 $ 12,365 $ 0.18
Adjustments:
Amortization
of
intangible
assets(1) 1,763 0.03 1,835 0.03
Stock Based
Compensation
(2) 3,296 0.05 3,312 0.05
Other (3) 73 0.00 220 0.00
Provision
for income
taxes (4) (888) (0.01) (1,694) (0.03)
------------- ------------- ------------- -------------
Non-GAAP net
income $ 17,962 $ 0.26 $ 16,038 $ 0.24
============= ============= ============= =============
Weighted
average number
of shares
outstanding:
Basic 67,636 66,285
Diluted 68,766 66,869
(1) The adjustments represent the amortization of purchased technology and
other intangibles related to the acquisitions of Steleus, iptelorg and
mBalance.
(2) The adjustments represent stock-based compensation expense recognized
related to awards of stock options, restricted stock or restricted stock
units and stock appreciation rights granted under our equity incentive
plans and stock purchase rights granted under our employee stock purchase
plan.
(3) The adjustment represents consideration payable to Estacado that is
contingent upon the continued employment of certain former Estacado
employees by Tekelec.
(4) The adjustment represents the income tax effect of footnotes (1), (2)
and (3) in order to reflect our non-GAAP effective tax rate.
(5) We operate under a thirteen-week calendar quarter. For financial
statement presentation purposes, the reporting periods are referred to as
ended on the last day of the calendar quarter. The accompanying
Reconciliations of Selected GAAP Measures to non-GAAP measures are
for the thirteen weeks ended April 2, 2010 and April 3, 2009.
Contacts:
Mike Gallentine
Director, Investor Relations
(o) +1.919.461.6825
Email Contact
Joanne Latham
Director, Marketing Communications
(o) +1.919.653.9655
Email Contact
