Dialogic Inc. Reports Second Quarter 2013 Financial Results

Dialogic Inc. Reports Second Quarter 2013 Financial Results

MILPITAS, Calif.--(BUSINESS WIRE)-- Dialogic Inc. (OTCQB: DLGC), the Network Fuel™ company, today announced second quarter results for the period ending June 30, 2013.

GAAP Results


Total Revenue for the second quarter of 2013 was $31.1 million compared to $33.8 million in the first quarter of 2013 and $36.9 million in the second quarter of 2012. Gross Margin for the second quarter of 2013 was 57.6% compared to 57.9% in the first quarter of 2013 and 45.2% in the second quarter of 2012. Operating Expense for the second quarter of 2013 was $23.2 million compared to $25.5 million in the first quarter of 2013 and $35.5 million in the second quarter of 2012. Net Loss for the second quarter of 2013 was $5.7 million, or $0.36 per share compared to $10.4 million, or $0.68 per share, in the first quarter of 2013 and $19.0 million, or $3.00 per share, in the second quarter of 2012. Cash on hand for the second quarter of 2013 was $8.4 million compared to $4.4 million in the first quarter of 2013 and $6.5 million in the second quarter of 2012.

Non-GAAP Results

Total Revenue for the second quarter of 2013 was $31.3 million compared to $34.0 million in the first quarter of 2013 and $37.6 million in the second quarter of 2012. Gross Margin for the second quarter of 2013 was 61.8% compared to 62.4% in the first quarter of 2013 and 65.2% in the second quarter of 2013. Operating Expense for the second quarter of 2013 was $20.6 million compared to $22.1 million in the first quarter of 2013 and $27.5 million in the second quarter of 2012. Adjusted EBITDA for the second quarter of 2013 was ($1.2) million compared to ($0.9) million in the first quarter of 2013 and ($3.0) million in the second quarter of 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 March 31, 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 is a registered trademark and Network Fuel is a trademark 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 June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Revenue:

Products

$

22,751

$

26,954

$

47,484

$

59,442

Services

8,324

9,960

17,386

19,557

Total revenue

31,075

36,914

64,870

78,999

Cost of revenue:

Products

8,868

15,264

18,445

26,675

Services

4,303

4,978

8,944

10,149

Total cost of revenue

13,171

20,242

27,389

36,824

Gross profit

17,904

16,672

37,481

42,175

Operating expenses:

Research and development, net

7,083

11,370

15,116

24,193

Sales and marketing

8,356

11,063

17,604

22,674

General and administrative

7,629

8,806

15,589

16,391

Restructuring charges

114

4,246

326

4,303

Total operating expenses

23,182

35,485

48,635

67,561

Loss from operations

(5,278

)

(18,813

)

(11,154

)

(25,386

)

Other income (expense):

Interest and other expense, net

(13

)

(66

)

(53

)

(149

)

Interest expense

(2,532

)

(2,943

)

(4,899

)

(7,043

)

Change in fair value of warrants

2,479

3,338

1,273

405

Foreign exchange loss, net

(550

)

(667

)

(911

)

(769

)

Total other expense, net

(616

)

(338

)

(4,590

)

(7,556

)

Loss before (benefit) provision for income taxes

(5,894

)

(19,151

)

(15,744

)

(32,942

)

Income tax (benefit) provision

(207

)

(112

)

303

248

Net loss

$

(5,687

)

$

(19,039

)

$

(16,047

)

$

(33,190

)

Net loss per share - basic and diluted

$

(0.36

)

$

(3.00

)

$

(1.03

)

$

(5.25

)

Weighted average shares of common stock used in

calculation of net loss per share - basic and diluted

15,907

6,337

15,590

6,318

Dialogic Inc.

Consolidated Balance Sheets

(In thousands, except share and per share data)

June 30,

December 31,

2013

2012

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

8,389

$

6,501

Restricted cash

1,180

900

Accounts receivable, net of allowance of $2,211 and $1,217, respectively

24,482

32,422

Inventory

6,246

8,874

Other current assets

6,754

8,993

Total current assets

47,051

57,690

Property and equipment, net

4,995

5,978

Intangible assets, net

22,129

25,089

Goodwill

31,223

31,223

Other assets

2,111

2,147

Total assets

$

107,509

$

122,127

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Accounts payable

$

10,089

$

16,994

Accrued liabilities

18,367

21,270

Deferred revenue, current portion

14,067

12,742

Bank indebtedness

15,188

11,717

Income taxes payable

889

1,007

Total current liabilities

58,600

63,730

Long-term debt, related parties, net of discount

70,692

66,536

Warrants

712

1,985

Other long-term liabilities

7,706

8,978

Total liabilities

137,710

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 15,948,782 and 14,415,652 shares, respectively

16

14

Additional paid-in capital

262,418

257,658

Accumulated other comprehensive loss

(22,237

)

(22,423

)

Accumulated deficit

(270,398

)

(254,351

)

Total stockholders' deficit

(30,201

)

(19,102

)

Total liabilities and stockholders' deficit

$

107,509

$

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 expenses. 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 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 June 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

Adjusted EBITDA

Revenue:

Products

$

22,751

-

-

-

-

92

-

-

$

22,843

Se