Dialogic Inc. Reports Fourth Quarter and Full Year 2013 Financial Results

MILPITAS, Calif.--()--Dialogic Inc., (OTCQB:DLGC), the Network Fuel® company, today announced fourth quarter and full year financial results for the period ending December 31, 2013.

GAAP Results

Total Revenue for the fourth quarter of 2013 was $37.0 million compared to $30.2 million in the third quarter of 2013 and $37.0 million in the fourth quarter of 2012. Gross Margin for the fourth quarter of 2013 was 66.2% compared to 63.8% in the third quarter of 2013 and 60.5% in the fourth quarter of 2012. Operating Expenses for the fourth quarter of 2013 were $58.4 million, including an impairment charge of $31.8 million, compared to Operating Expenses of $17.5 million in the third quarter of 2013 and $28.5 million in the fourth quarter of 2012. Net Loss for the fourth quarter of 2013 was $37.0 million, or $2.29 per share compared to $0.9 million, or $0.05 per share, in the third quarter of 2013 and $5.3 million, or $0.36 per share, in the fourth quarter of 2012. Cash on hand for the fourth quarter of 2013 was $4.5 million compared to $4.5 million in the third quarter of 2013 and $6.5 million in the fourth quarter of 2012.

Total Revenue for full year 2013 was $132.1 million compared to $160.1 million in 2012. Gross Margin for 2013 was 61.5% compared to 57.4% in 2012. Operating Expenses for 2013 were $124.5 compared to $122.5 million in 2012. Net Loss for 2013 was $53.9 million, or $3.40 per share, compared to a net loss of $37.6 million in 2012, or $4.03 per share.

Non-GAAP Results

Total Revenue for the fourth quarter of 2013 was $37.0 million compared to $30.3 million in the third quarter of 2013 and $38.2 million in the fourth quarter of 2012. Gross Margin for the fourth quarter of 2013 was 69.4% compared to 67.8% in the third quarter of 2013 and 64.6% in the fourth quarter of 2012. Operating Expenses for the fourth quarter of 2013 were $20.5 million compared to $18.3 million in the third quarter of 2013 and $23.8 million in the fourth quarter of 2012. Adjusted EBITDA for the fourth quarter of 2013 was $5.1 million compared to $2.3 million in the third quarter of 2013 and $0.8 million in the fourth quarter of 2012.

Total Revenue for 2013 was $132.6 million compared to $162.5 million in 2012. Gross Margin for 2013 was 65.4% compared to 65.0% in 2012. Operating Expenses for 2013 were $81.5 million compared to $104.7 million in 2012. Adjusted EBITDA for 2013 was $5.3 million compared to $1.0 million in 2012.

About Dialogic:

Dialogic (OTCQB:DLGC), the Network Fuel® company, inspires the world's leading service providers and application developers to elevate the performance of media-rich communications across the most advanced networks. We boost the reliability of any-to-any network connections, supercharge the impact of applications and amplify the capacity of congested networks. Forty-eight of the world's top 50 mobile operators and nearly 3,000 application developers rely on Dialogic to redefine the possible and exceed user expectations.

For more information on Dialogic and the communications solutions energized by our technology, visit www.dialogic.com and www.dialogic.com/en/showcase. Also, visit our social media newsroom for the latest news, videos and blog posts.

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 our ability to continue to achieve operational, organizational and financial savings through initiatives already in process or which may be put in process, generate positive cash flow and support continued revenue growth, the potential market for and market acceptance of our products, industry and competitive market conditions, gross margin expansion, creating new revenue opportunities, reducing operating expenses 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 Dialogic's business is set forth in the "Risk Factors" section in our Quarterly Report on Form 10-Q for the three months ended September 30, 2013, 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.

Dialogic and Network Fuel are registered trademarks of Dialogic Inc. or a subsidiary. (DLGC-IR)

GAAP Financial Tables

       
Dialogic Inc.
Consolidated Statements of Operations (GAAP)
(In thousands, except per share data)
 
Three Months Ended December 31,   Twelve Months Ended December 31,
  2013       2012       2013       2012  

Revenue:

Products $ 25,380 $ 28,060 $ 93,705 $ 121,339
Services   11,623       8,932       38,376       38,740  

Total revenue

  37,003       36,992       132,081       160,079  
 

Cost of revenue:

Products 8,044 10,150 33,433 48,479
Services   4,471       4,445       17,402       19,712  

Total cost of revenue

  12,515       14,595       50,835       68,191  

Gross profit

  24,488       22,397       81,246       91,888  
 

Operating expenses:

Research and development, net 6,282 9,326 27,279 42,785
Sales and marketing 8,155 9,521 33,374 41,456
General and administrative 7,519 7,414 29,388 31,180
Restructuring charges, net 4,641 2,270 2,644 7,030
Impairment of goodwill and intangible assets   31,841       -       31,841       -  

Total operating expenses

  58,438       28,531       124,526       122,451  

Loss from operations

(33,950 ) (6,134 ) (43,280 ) (30,563 )
 

Other income (expense):

Interest and other income, net 210 85 266 180
Interest expense (2,647 ) (1,894 ) (10,166 ) (10,730 )
Change in fair value of warrants 431 2,932 1,822 5,086
Foreign exchange loss, net   116       (331 )     (803 )     (1,378 )

Total other income (expense), net

  (1,890 )     792       (8,881 )     (6,842 )

Loss before provision for income taxes

(35,840 ) (5,342 ) (52,161 ) (37,405 )

Income tax provision (benefit)

  1,197       (91 )     1,774       213  

Net loss

$ (37,037 )   $ (5,251 )   $ (53,935 )   $ (37,618 )
 

Net loss per share - basic and diluted

$ (2.29 ) $ (0.36 ) $ (3.40 ) $ (4.03 )

Weighted average shares of common stock used in

calculation of net loss per share - basic and diluted

  16,206       14,409       15,860       9,341  
 
   

Dialogic Inc.

Consolidated Balance Sheets

(In thousands, except share and per share data)

December 31,
2013   2012
 

ASSETS

Current assets:

Cash and cash equivalents $ 4,508 $ 6,501
Restricted cash 1,180 900
Accounts receivable, net of allowance of $3,019 and $1,217, respectively 24,472 32,422
Inventory 5,799 8,874
Other current assets   7,240       8,993  

Total current assets

43,199 57,690

Property and equipment, net

3,775 5,978

Intangible assets, net

10,287 25,089

Goodwill

8,282 31,223

Other assets

  1,181       2,147  

Total assets

$ 66,724     $ 122,127  
 

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Accounts payable $ 7,781 $ 16,994
Accrued liabilities 17,808 21,270
Deferred revenue, current portion 13,094 12,742
Bank indebtedness 12,080 11,717
Income taxes payable   863       1,007  

Total current liabilities

51,626 63,730

Long-term debt, related parties, net of discount

75,513 66,536

Warrants

163 1,985

Other long-term liabilities

  6,419       8,978  

Total liabilities

133,721 141,229

Commitments and contingencies

Preferred stock, $0.001 par value:

Authorized - 10,000,000 shares; Issued and outstanding - 1 share

- -

Stockholders' deficit:

Common stock, $0.001 par value:

Authorized - 200,000,000 shares; Issued and outstanding 16,239,315 and 14,415,652 shares, respectively

16 14
Additional paid-in capital 263,354 257,658
Accumulated other comprehensive loss (22,081 ) (22,423 )
Accumulated deficit   (308,286 )     (254,351 )

Total stockholders' deficit

  (66,997 )     (19,102 )

Total liabilities and stockholders' deficit

$ 66,724     $ 122,127  
 

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. Dialogic believes that presenting non-GAAP Adjusted EBITDA is useful to investors, because it reflects the operating performance of Dialogic. Dialogic management uses these non-GAAP measures as important indicators of the company's past performance and in planning and forecasting performance in future periods. Dialogic considers EBITDA, as adjusted, an important measure of its ability to generate cash flows to fund operating activities, service debt, fund capital expenditures and fund other corporate investing and financing activities. EBITDA, as adjusted, eliminates the non-cash effect of tangible asset depreciation and amortization of intangible assets and stock-based compensation, as well as certain nonrecurring items. EBITDA should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities. The non-GAAP financial information Dialogic 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 GAAP financial measures to non-GAAP financial measures included elsewhere in this press release.

In respect of the foregoing, Dialogic 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:

"EBITDA" is defined as earnings before interest, income taxes, depreciation and amortization. "Adjusted EBITDA" is defined as EBITDA, plus adjustments for nonrecurring items or other adjustments. Adjusted EBITDA includes EBITDA but excludes restructuring and integration costs, product rationalization, non-cash stock compensation expense, purchase accounting adjustments, SEC inquiry expenses, an impairment charge related to goodwill and indefinite-lived assets and other non-recurring transactions such as revenue reversals and bad debt charges, as well as other income (expense) items which include the change in the fair value of warrants and foreign exchange gain (loss). Dialogic considers Adjusted EBITDA as a key metric in evaluating its financial performance.

Non-GAAP Financial Tables

                 
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended December 31, 2013
(in thousands, except per share data)
(unaudited)
 
GAAP   Depreciation and Amortization   Restructuring and Integration Costs   Product Rationalization   Stock-based Compensation Expense   Purchase Accounting Adjustments   SEC Inquiry   Other Adjustments   Adjusted EBITDA
Revenue:

Products

$ 25,380 - - - - - - - $ 25,380

Services

11,623 - - - - - - - 11,623
 
Cost of revenue:

Products

8,044 (1,165 ) - - (20 ) - - - 6,859

Services

4,471 - - - - - - - 4,471
 
Operating expenses:

Research and development, net

6,282 (212 ) - - (24 ) - - - 6,046

Sales and marketing

8,155 (372 ) - - (66 ) - - - 7,717

General and administrative

7,519 (513 ) (69 ) - (317 ) - 3 140 6,763

Restructuring charges, net

4,641 - (4,641 ) - - - - - -

Impairment of goodwill and intangible assets

31,841 - - - - - - (31,841 ) -
 
Total other expense, net (1,890 ) - - - - - - 1,890 -
Income tax provision   1,197     -     -     -     -     -     -     (1,197 )     -
Net (loss) income $ (37,037 )   2,262     4,710     -     427     -     (3 )   2,947     $ 5,147
 
Net (loss) income per share - basic and diluted $ (2.29 ) $ 0.32
Weighted average shares of common stock used in
calculation of net (loss) income per share - basic and diluted   16,206     16,206
 
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended December 31, 2012
(in thousands, except per share data)
(unaudited)
 
GAAP   Depreciation and Amortization   Restructuring and Integration Costs   Product Rationalization   Stock-based Compensation Expense   Purchase Accounting Adjustments   SEC Inquiry   Other Adjustments   Non-GAAP
Revenue:

Products

$ 28,060 - - - - 73 - 737 $ 28,870

Services

8,932 - - - - 149 - 200 9,281
 
Cost of revenue:

Products

10,150 (1,016 ) - - (61 ) - - - 9,073

Services

4,445 - - - - - - - 4,445
 
Operating expenses:

Research and development, net

9,326 (303 ) - - (130 ) - - - 8,893

Sales and marketing

9,521 (620 ) - - (157 ) - - - 8,744

General and administrative

7,414 (358 ) (352 ) - (245 ) (60 ) (232 ) - 6,167

Restructuring charges, net

2,270 - (2,270 ) - - - - - -
 
Total other expense, net 792 - - - - - - (792 ) -
Income tax benefit   (91 )   -     -     -     -     -     -     91       -
Net (loss) income $ (5,251 )   2,297     2,622     -     593     282     232     54     $ 829
 
Net (loss) income per share - basic and diluted $ (0.36 ) $ 0.06
Weighted average shares of common stock used in
calculation of net (loss) income per share - basic and diluted   14,409     14,409
 
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended September 30, 2013
(in thousands, except per share data)
(unaudited)
 
GAAP   Depreciation and Amortization   Restructuring and Integration Costs   Product Rationalization   Stock-based Compensation Expense   Purchase Accounting Adjustments   SEC Inquiry   Other Adjustments   Non-GAAP
Revenue:

Products

$ 20,841 - - - - 35 - - $ 20,876

Services

9,366 - - - - 58 - - 9,424
 
Cost of revenue:

Products

6,944 (1,166 ) - - (20 ) - - - 5,758

Services

3,986 - - - - - - - 3,986
 
Operating expenses:

Research and development, net

5,881 (207 ) - - (25 ) - - - 5,649

Sales and marketing

7,615 (372 ) - - (61 ) - - - 7,182

General and administrative

6,280 (512 ) (24 ) - (362 ) - 66 7 5,455

Restructuring charges, net

(2,323 ) - 2,323 - - - - - -
 
Total other expense, net (2,401 ) - - - - - - 2,401 -
Income tax provision   274     -     -     -     -     -     -     (274 )     -
Net (loss) income $ (851 )   2,257     (2,299 )   -     468     93     (66 )   2,668     $ 2,270
 
Net (loss) income per share - basic and diluted $ (0.05 ) $ 0.14
Weighted average shares of common stock used in
calculation of net (loss) income per share - basic and diluted   16,046     16,046
 
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Twelve Months Ended December 31, 2013
(in thousands, except per share data)
(unaudited)
 
GAAP   Depreciation and Amortization   Restructuring and Integration Costs   Product Rationalization   Stock-based Compensation Expense   Purchase Accounting Adjustments   SEC Inquiry   Other Adjustments   Non-GAAP
Revenue:

Products

$ 93,705 - - - - 152 - - $ 93,857

Services

38,376 - - - - 322 - - 38,698
 
Cost of revenue:

Products

33,433 (4,675 ) - (198 ) (152 ) - - - 28,408

Services

17,402 - - - - - - - 17,402
 
Operating expenses:

Research and development, net

27,279 (966 ) - - (145 ) - - - 26,168

Sales and marketing

33,374 (1,487 ) - - (400 ) - - - 31,487

General and administrative

29,388 (2,024 ) (1,069 ) - (1,496 ) - 160 (1,119 ) 23,840

Restructuring charges, net

2,644 - (2,644 ) - - - - -

Impairment of goodwill and indefinite-lived assets

31,841 - - - - - - (31,841 ) -
 
Total other expense, net (8,881 ) - - - - - - 8,881 -
Income tax provision   1,774     -     -     -     -     -     -     (1,774 )     -
Net (loss) income $ (53,935 )   9,152     3,713     198     2,193     474     (160 )   43,615     $ 5,250
 
Net (loss) income per share - basic and diluted $ (3.40 ) $ 0.33
Weighted average shares of common stock used in
calculation of net (loss) income per share - basic and diluted   15,860     15,860
 
 
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Twelve Months Ended December 31, 2012
(in thousands, except per share data)
(unaudited)
 
GAAP   Depreciation and Amortization   Restructuring and Integration Costs   Product Rationalization   Stock-based Compensation Expense   Purchase Accounting Adjustments   SEC Inquiry   Other Adjustments   Non-GAAP
Revenue:

Products

$ 121,339 - - - - 507 - 737 $ 122,583

Services

38,740 - - - - 976 - 200 39,916
 
Cost of revenue:

Products

48,479 (5,860 ) - (5,337 ) (210 ) 156 - - 37,228

Services

19,712 - - - (95 ) - - - 19,617
 
Operating expenses:

Research and development, net

42,785 (1,409 ) 4 - (636 ) 73 - - 40,816

Sales and marketing

41,456 (2,739 ) 19 - (708 ) 6 - - 38,035

General and administrative

31,180 (1,494 ) (2,550 ) - (840 ) 9 (475 ) - 25,830

Restructuring charges, net

7,030 - (7,030 ) - - - - - -
 
Total other expense, net (6,842 ) - - - - - - 6,842 -
Income tax provision   213     -     -     -     -     -     -     (213 )     -
Net (loss) income $ (37,618 )   11,502     9,557     5,337     2,489     1,239     475     7,992     $ 973
 
Net (loss) income per share - basic and diluted $ (4.03 ) $ 0.10
Weighted average shares of common stock used in
calculation of net (loss) income per share - basic and diluted   9,341     9,341
 

Contacts

Investor Relations:
Dialogic Inc.
Andrew Goldberg, 973-967-6425
Senior Vice President, Marketing & Strategy
Andrew.Goldberg@dialogic.com

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Contacts

Investor Relations:
Dialogic Inc.
Andrew Goldberg, 973-967-6425
Senior Vice President, Marketing & Strategy
Andrew.Goldberg@dialogic.com