SOURCE: Acme Packet

Acme Packet

October 25, 2012 16:05 ET

Acme Packet Reports Results for Third Quarter of 2012

Company Updates Outlook for 2012

BEDFORD, MA--(Marketwire - Oct 25, 2012) - Acme Packet, Inc. (NASDAQ: APKT), the leader in session delivery network solutions, today announced results for the third quarter of 2012 and updated its business outlook for 2012. All earnings per share results are on a fully diluted basis.

Results for the Third Quarter of 2012
Total revenue for the third quarter of 2012 was $65.3 million, compared to $70.6 million in the third quarter of 2011 and $67.6 million in the second quarter of 2012. GAAP net loss for the third quarter of 2012 was $5.5 million, or $(0.08) per share, compared to GAAP net income of $7.9 million, or $0.11 per share, in the third quarter of 2011 and GAAP net loss of $0.1 million, or $(0.00) per share, in the second quarter of 2012. Net income on a non-GAAP1 basis for the third quarter of 2012 was $4.7 million, or $0.07 per share, compared to $14.6 million, or $0.21 per share, in the third quarter of 2011, and $9.5 million, or $0.13 per share, in the second quarter of 2012. 

Company Updates Business Outlook for 2012
The Company today updated its business outlook for 2012. The Company's outlook is based on the current indications for its business, which may change at any time. A reconciliation of the Company's expected GAAP to non-GAAP business outlook, and a statement as to the use of non-GAAP financial measures, is included at the end of this press release.

     
     
    Business Outlook for Year Ending December 31, 2012
Estimate   Issued on July 26, 2012   Issued on October 25, 2012
Total revenue (in millions)   $270-$275   No change
GAAP Earnings (loss) Per Share   $(0.11)-$(0.07)   $(0.11)-$(0.08)
Non-GAAP1 Earnings Per Share   $0.43-$0.47   $0.44-$0.46
         
         

Company to Host Live Conference Call and Webcast
The Company's management team plans to host a live conference call and webcast at 4:30 p.m. eastern time today to discuss the financial results as well as management's outlook for the business. The conference call may be accessed in the United States by dialing 1.800.230.1085 and using access code "APKT". The conference call may be accessed outside of the United States by dialing +1.612.234.9960 and using access code "APKT". The conference call will be simultaneously webcast on the Company's investor relations website, which can be accessed at www.ir.acmepacket.com. A replay of the conference call will be available approximately two hours after the call by dialing 1.800.475.6701 or +1.320.365.3844 and using access code 265599 or by accessing the webcast replay on the Company's investor relations website.

1A reconciliation of GAAP to non-GAAP results, and a statement on the use of non-GAAP financial measures, is included at the end of this press release.

About Acme Packet
Acme Packet (NASDAQ: APKT), the leader in session delivery network solutions, enables the trusted, first-class delivery of next-generation voice, video, data and unified communications services and applications across IP networks. Our Net-Net product family fulfills demanding security, service assurance and regulatory requirements in service provider, enterprise and contact center networks. Based in Bedford, Massachusetts, Acme Packet designs and manufactures its products primarily in the USA, selling them through over 309 reseller partners worldwide. More than 1,850 customers in 109 countries have deployed over 20,000 Acme Packet systems, including 89 of the top 100 service providers and 48 of the Fortune 100. For more information visit www.acmepacket.com.

Acme Packet, Inc. Safe Harbor Statement
Statements contained herein that are not historical fact may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may relate to, among other things, expected financial and operating results, expected growth rates, future stock-based compensation and amortization expenses, future business prospects and market conditions. Such forward-looking statements do not constitute guarantees of future performance and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those anticipated. These include, but are not limited to: the amount of stock-based compensation awarded; the applicable Company stock price used to determine stock-based compensation; the exercise pattern of employee stock options; difficulties expanding the Company's customer base; difficulties leveraging market opportunities; difficulties providing solutions that meet the needs of customers; poor product sales; long sales cycles; difficulties developing new products; difficulties in relationships with vendors and partners; higher risks in international operations; difficulties managing rapid growth; difficulties managing the Company's financial performance; the ability to hire and retain employees and appropriately staff operations; the Company's cash needs; the impact of new accounting pronouncements and increased competition. Additional factors that could cause actual results to differ materially from those projected or suggested in any forward-looking statements are contained in the Company's recent filings with the Securities and Exchange Commission, including those factors discussed under the caption "Risk Factors" in such filings.

   
Acme Packet, Inc.  
Condensed Consolidated Statements of Operations  
(in thousands, except share and per share data)  
(unaudited)  
   
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
Revenue:                                
  Product   $ 46,771     $ 53,077     $ 149,791     $ 177,507  
  Maintenance, support and service     18,550       17,544       53,944       46,814  
    Total revenue     65,321       70,621       203,735       224,321  
                                 
Cost of revenue:                                
  Product     9,584       8,778       29,347       30,090  
  Maintenance, support and service     4,261       3,042       11,894       8,573  
    Total cost of revenue     13,845       11,820       41,241       38,663  
                                 
Gross profit     51,476       58,801       162,494       185,658  
                                 
Operating expenses:                                
  Sales and marketing     35,090       27,201       98,230       75,640  
  Research and development     16,898       13,249       48,252       37,262  
  General and administrative     6,154       5,406       18,441       15,771  
  Merger related costs     30       120       643       300  
    Total operating expenses     58,172       45,976       165,566       128,973  
                                 
(Loss) income from operations     (6,696 )     12,825       (3,072 )     56,685  
                                 
Other income (expense), net     52       (53 )     127       (147 )
                                 
(Loss) income before income taxes     (6,644 )     12,772       (2,945 )     56,538  
                                 
(Benefit from) provision for income taxes     (1,129 )     4,846       268       20,895  
                                 
Net (loss) income   $ (5,515 )   $ 7,926     $ (3,213 )   $ 35,643  
                                 
Net (loss) income per share:                                
  Basic   $ (0.08 )   $ 0.12     $ (0.05 )   $ 0.54  
  Diluted   $ (0.08 )   $ 0.11     $ (0.05 )   $ 0.50  
                                 
Weighted average number of common shares used in the calculation of net (loss) income per share:                                
  Basic     68,246,091       66,752,669       68,235,987       66,011,761  
  Diluted     68,246,091       70,908,590       68,235,987       70,887,241  
                                 
                                 
                                 
Acme Packet, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands)  
(unaudited)  
   
       
    September 30,
2012
    December 31,
2011
 
Assets            
Current assets:                
  Cash and cash equivalents   $ 56,167     $ 160,403  
  Short-term investments     307,294       191,672  
  Accounts receivable, net     57,155       59,739  
  Inventory     11,354       10,246  
  Deferred product costs     814       1,515  
  Deferred tax asset, net     4,809       4,809  
  Income taxes receivable     4,599       4,341  
  Other current assets     5,091       4,385  
    Total current assets     447,283       437,110  
Long-term investments     10,046       20,096  
Property and equipment, net     38,030       26,252  
Intangible assets, net     20,327       8,569  
Goodwill     15,170       3,778  
Deferred tax asset, net     18,371       18,371  
Other assets     395       230  
Total assets   $ 549,622     $ 514,406  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
  Accounts payable   $ 10,544     $ 10,318  
  Accrued expenses and other current liabilities     14,798       12,715  
  Deferred revenue     26,385       22,261  
    Total current liabilities     51,727       45,294  
                 
Deferred revenue, net of current portion     2,235       2,049  
Deferred rent     9,640       4,533  
Deferred tax liability     4,064       -  
                 
Stockholders' equity:                
  Common stock     75       74  
  Additional paid-in capital     415,196       363,769  
  Treasury stock, at cost     (66,311 )     (37,522 )
  Accumulated other comprehensive income     1       1  
  Retained earnings     132,995       136,208  
    Total stockholders' equity     481,956       462,530  
Total liabilities and stockholders' equity   $ 549,622     $ 514,406  
                 
                 
                 
Condensed Consolidated Statements of Cash Flow Data  
(in thousands)  
(unaudited)  
   
   
    Three Months Ended   Nine Months Ended  
    September 30,   September 30,  
    2012     2011   2012     2011  
Cash provided by operating activities   $ 6,701     $ 16,441   $ 57,020     $ 36,646  
Cash provided by (used in) investing activities     16,521       10,516     (143,820 )     (14,486 )
Cash (used in) provided by financing activities     (28,398 )     9,434     (17,436 )     43,133  
                               
                               
                               
Acme Packet, Inc.
Statement on Use of Non-GAAP Financial Measures and
Reconciliation of Non-GAAP Net (Loss) Income and Non-GAAP Net (Loss) Income Per Share
 (in thousands, except share and per share data)
(unaudited)
 

Statement on Use of Non-GAAP Financial Measures:

To supplement its condensed consolidated statements of operations presented in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company discloses certain non-GAAP financial measures, including "non-GAAP net (loss) income", "net (loss) income on a non-GAAP basis", "non-GAAP EPS", and "net (loss) income per share on a non-GAAP basis". These non-GAAP financial measures are not presented in accordance with GAAP and are not meant to be a substitute for the most directly comparable GAAP measures of "net (loss) income", "EPS" or "net (loss) income per share". Rather, these non-GAAP financial measures should be evaluated in conjunction with its most directly comparable GAAP financial measure and the Company's financial statements as a whole. 

Management uses these supplemental non-GAAP financial measures to evaluate performance period over period, to analyze the underlying trends in the Company's business, to assess its performance relative to its competitors, and to establish operational goals and forecasts that are used in allocating resources. Management uses these non-GAAP financial measures because they exclude stock-based compensation expense which is a non-cash charge and related payroll taxes, amortization of acquired intangible assets, and merger and related costs associated with the Company's acquisition activities all of which are non-operational costs and expenses. By excluding stock-based compensation expense and related payroll taxes, amortization of acquired intangible assets, and merger and related costs, management can compare the Company's operations to prior periods and to the operations of other companies in its industry who may have materially different unusual, non-operational charges. Management does not consider any of stock-based compensation expense and related payroll taxes, amortization of acquired intangible assets, and merger and related costs to be part of the Company's operating activities or meaningful in evaluating the Company's past financial performance or future prospects. Management believes that excluding these items is useful to investors because it is more representative of ongoing costs and therefore more comparable to historical operations. 

Because management uses them, management believes that the disclosure of these non-GAAP financial measures to investors provides greater transparency and useful information to help the investor better understand the Company's operating performance and to evaluate the methodology used by management to evaluate and measure such performance. Notwithstanding their utility to investors in understanding operational trends, these non-GAAP measures should not be considered measures of the Company's liquidity. In addition, the Company cautions that its definition of "non-GAAP net (loss) income", "net (loss) income on a non-GAAP basis", "non-GAAP EPS" and "net (loss) income per share on a non-GAAP basis" may differ from similar measures used by other companies and may differ from period to period. Also, in future periods, management may make other adjustments for expenses and gains that it does not consider reflective of core operating performance in a particular period thereby modifying its definition of "non-GAAP net (loss) income", "non-GAAP EPS" and "non-GAAP net (loss) income per share" by excluding these other or additional expenses and gains. 

Reconciliation of GAAP to Non-GAAP Financial Measures for the Three Months Ended September 30, 2012, June 30, 2012 and September 30, 2011 and for the Nine Months Ended September 30, 2012 and September 30, 2011:

 
Acme Packet, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended September 30, 2012
(in thousands, except per share data)
(unaudited)
 
    GAAP     Stock-based compensation expense and related payroll taxes     Amortization of acquired intangible assets     Merger
related
costs
    Non-GAAP1
Cost of revenue:                                      
  Product   $ 9,584     $ (438 )   $ (658 )   $ -     $ 8,488
  Maintenance, support and service     4,261       (702 )     -       -       3,559
                                       
Operating expenses:                                      
  Sales and marketing     35,090       (6,794 )     (261 )     -       28,035
  Research and development     16,898       (4,181 )     (51 )     -       12,666
  General and administrative     6,154       (1,336 )     -       -       4,818
  Merger related costs     30       -       -       (30 )     -
                                       
(Benefit from) provision for income taxes     (1,129 )     3,844       359       -       3,074
                                       
Net (loss) income     (5,515 )     9,607       611       30       4,733
                                       
Net (loss) income per share:                                      
  Basic   $ (0.08 )   $ 0.14     $ 0.01     $ 0.00     $ 0.07
  Diluted   $ (0.08 )   $ 0.14     $ 0.01     $ 0.00     $ 0.07
                                       
Weighted average number of shares used in the calculation of net (loss) income per share:                                      
  Basic     68,246,091       68,246,091       68,246,091       68,246,091       68,246,091
  Diluted     68,246,091       70,102,125       70,102,125       70,102,125       70,102,125
                                       
                                       
                                       
Acme Packet, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended June 30, 2012
(in thousands, except per share data)
(unaudited)
 
    GAAP     Stock-based compensation expense and related payroll taxes     Amortization of acquired intangible assets     Merger
related
costs
    Non-GAAP1
Cost of revenue:                                      
  Product   $ 9,785     $ (442 )   $ (583 )   $ -     $ 8,760
  Maintenance, support and service     3,675       (717 )     -       -       2,958
                                       
Operating expenses:                                      
  Sales and marketing     32,138       (6,570 )     (238 )     -       25,330
  Research and development     16,257       (4,354 )     (34 )     -       11,869
  General and administrative     5,849       (1,502 )     -       -       4,347
  Merger related costs     576       -       -       (576 )     -
                                       
(Benefit from) provision for income taxes     (588 )     5,072       319       -       4,803
                                       
Net (loss) income     (127 )     8,513       536       576       9,498
                                       
Net (loss) income per share:                                      
  Basic   $ (0.00 )   $ 0.12     $ 0.01     $ 0.01     $ 0.14
  Diluted   $ (0.00 )   $ 0.12     $ 0.01     $ 0.01     $ 0.13
                                       
Weighted average number of shares used in the calculation of net (loss) income per share:                                      
  Basic     68,507,111       68,507,111       68,507,111       68,507,111       68,507,111
  Diluted     68,507,111       70,927,009       70,927,009       70,927,009       70,927,009
                                       
                                       
                                       
Acme Packet, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended September 30, 2011
(in thousands, except per share data)
(unaudited)
 
   
GAAP
    Stock-based compensation expense and related payroll taxes     Amortization of acquired intangible assets     Merger related costs     Non-GAAP1
Cost of revenue:                                      
  Product   $ 8,778     $ (327 )   $ (385 )   $ -     $ 8,066
  Maintenance, support and service     3,042       (568 )     -       -       2,474
                                       
Operating expenses:                                      
  Sales and marketing     27,201       (4,784 )     (101 )     -       22,316
  Research and development     13,249       (2,929 )     (11 )     -       10,309
  General and administrative     5,406       (1,615 )     -       -       3,791
  Merger related costs     120       -       -       (120 )     -
                                       
Provision for income taxes     4,846       3,896       179       43       8,964
                                       
Net income     7,926       6,327       318       77       14,648
                                       
Net income per share:                                      
  Basic   $ 0.12     $ 0.09     $ 0.01     $ 0.00     $ 0.22
  Diluted   $ 0.11     $ 0.09     $ 0.01     $ 0.00     $ 0.21
                                       
Weighted average number of common shares used in the calculation of net income per share:                                      
  Basic     66,752,669       66,752,669       66,752,669       66,752,669       66,752,669
  Diluted     70,908,590       70,908,590       70,908,590       70,908,590       70,908,590
                                       
                                       
                                       
Acme Packet, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
Nine Months Ended September 30, 2012
(in thousands, except per share data)
(unaudited)
 
    GAAP     Stock-based compensation expense and related payroll taxes    

Amortization of acquired intangible assets
    Merger
related
costs
    Non-GAAP1
Cost of revenue:                                      
  Product   $ 29,347     $ (1,308 )   $ (1,675 )   $ -     $ 26,364
  Maintenance, support and service     11,894       (2,121 )     -       -       9,773
                                       
Operating expenses:                                      
  Sales and marketing     98,230       (19,778 )     (556 )     -       77,896
  Research and development     48,252       (12,830 )     (85 )     -       35,337
  General and administrative     18,441       (4,915 )     -       -       13,526
  Merger related costs     643       -       -       (643 )     -
                                       
Provision for income taxes     268       13,389       866       -       14,523
                                       
Net (loss) income     (3,213 )     27,563       1,450       643       26,443
                                       
Net (loss) income per share:                                      
  Basic   $ (0.05 )   $ 0.40     $ 0.02     $ 0.01     $ 0.39
  Diluted   $ (0.05 )   $ 0.39     $ 0.02     $ 0.01     $ 0.37
                                       
Weighted average number of common shares used in the calculation of net income per share:                                      
  Basic     68,235,987       68,235,987       68,235,987       68,235,987       68,235,987
  Diluted     68,235,987       70,698,124       70,698,124       70,698,124       70,698,124
                                       
                                       
                                       
Acme Packet, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
Nine Months Ended September 30, 2011
(in thousands, except per share data)
(unaudited)
 
    GAAP     Stock-based compensation expense and related payroll taxes     Amortization of acquired intangible assets     Merger
related
costs
    Non-GAAP1
Cost of revenue:                                      
  Product   $ 30,090     $ (916 )   $ (1,292 )   $ -     $ 27,882
  Maintenance, support and service     8,573       (1,518 )     -       -       7,055
                                       
Operating expenses:                                      
  Sales and marketing     75,640       (12,804 )     (287 )     -       62,549
  Research and development     37,262       (7,823 )     (34 )     -       29,405
  General and administrative     15,771       (3,898 )     -       -       11,873
  Merger related costs     300       -       -       (300 )     -
                                       
Provision for income taxes     20,895       9,874       581       43       31,393
                                       
Net income     35,643       17,085       1,032       257       54,017
                                       
Net income per share:                                      
  Basic   $ 0.54     $ 0.26     $ 0.02     $ 0.00     $ 0.82
  Diluted   $ 0.50     $ 0.24     $ 0.02     $ 0.00     $ 0.76
                                       
Weighted average number of common shares used in the calculation of net income per share:                                      
  Basic     66,011,761       66,011,761       66,011,761       66,011,761       66,011,761
  Diluted     70,887,241       70,887,241       70,887,241       70,887,241       70,887,241
                                       
                                       
                                       

Reconciliation of Expected Non-GAAP Net Income and Non-GAAP Net Income Per Share for the Year Ending December 31, 2012 (unaudited):

             
    Twelve Months Ending
December 31, 2012
(unaudited)
(in thousands, except per share data)
 
    Low     High  
                 
Revenue   $ 270,000     $ 275,000  
                 
Reconciliation of non-GAAP net income:                
GAAP net loss   $ (7,243 )   $ (5,243 )
Adjustments:                
  Stock-based compensation expense and related payroll taxes, net of taxes     35,500       35,500  
  Amortization of acquired intangible assets, net of taxes     2,100       2,100  
  Merger related costs     643       643  
Non-GAAP net income   $ 31,000     $ 33,000  
                 
Reconciliation of diluted non-GAAP net income per share:                
GAAP net loss per share   $ (0.11 )   $ (0.08 )
Adjustments:                
  Stock-based compensation expense and related payroll taxes, net of taxes     0.50       0.50  
  Amortization of acquired intangible assets, net of taxes     0.03       0.03  
  Merger related costs     0.01       0.01  
Non-GAAP net income per share   $ 0.44     $ 0.46  
                 
                 
Acme Packet, Inc.
Other Operational Data
(unaudited)
 
    Three Months Ended
    September 30,
2012
  June 30,
2012
  September 30,
2011
Other operational data:                  
Depreciation and amortization (in thousands)   $ 3,991   $ 3,591   $ 2,835
Capital expenditures (in thousands)     5,151     6,576     5,570
Days sales outstanding     79     66     65
Total headcount     863     831     741
Quarterly inventory turnover - annualized     3.28     3.40     3.27