Acme Packet Reports Results for Fourth Quarter of 2011

Fourth Quarter Revenues of $83.0 Million, Up 18% Year-Over-Year; Revenues of $307.3 Million in 2011, Up 33% Over 2010

Marketwired

BEDFORD, MA--(Marketwire -02/02/12)- Acme Packet, Inc. (NASDAQ: APKT - News), the leader in session delivery network solutions, today announced results for the fourth quarter and full year ended December 31, 2011. All earnings per share results are on a fully diluted basis.

Results for the Fourth Quarter of 2011
Total revenue for the fourth quarter of 2011 was $83.0 million, an increase of 18% compared to $70.2 million in the fourth quarter of 2010 and an increase of 18% compared to $70.6 million in the third quarter of 2011. Net income for the fourth quarter of 2011 was $8.7 million, or $0.12 per share, compared to $14.5 million, or $0.21 per share, in the fourth quarter of 2010 and $7.9 million, or $0.11 per share, in the third quarter of 2011. Net income on a non-GAAP(1) basis for the fourth quarter of 2011 was $18.3 million, or $0.26 per share, compared to $18.1 million, or $0.26 per share, in the fourth quarter of 2010, and $14.6 million, or $0.21 per share, in the third quarter of 2011.

Results for 2011
Total revenue in 2011 was $307.3 million, an increase of 33% compared to $231.2 million in 2010. Net income in 2011 was $44.4 million, or $0.63 per share, compared to $43.0 million, or $0.63 per share, in 2010. Net income on a non-GAAP(1) basis in 2011 was $72.3 million, or $1.02 per share, compared to $55.0 million, or $0.81 per share, in the same period last year.

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 1.800.230.1059 and using access code "APKT". The conference call may be accessed outside of the United States by dialing +1.612.234.9959 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 234067 or by accessing the webcast replay on the Company's investor relations website.

(1) A 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 - News), the leader in session delivery network solutions, enables the trusted, first-class delivery of next-generation voice, 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 in the USA, selling them through over 220 reseller partners worldwide. More than 1,600 customers in 107 countries have deployed over 16,000 Acme Packet systems, including 88 of the top 100 service providers and 41 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 Income
               (in thousands, except share and per share data)
                                 (unaudited)

                           Three Months Ended         Twelve Months Ended
                              December 31,               December 31,
                       -------------------------- --------------------------
                           2011          2010         2011          2010
                       ------------  ------------ ------------  ------------
Revenue:
  Product              $     64,276  $     57,346 $    241,783  $    186,798
  Maintenance, support
   and service               18,720        12,886       65,534        44,434
                       ------------  ------------ ------------  ------------
    Total revenue            82,996        70,232      307,317       231,232
                       ------------  ------------ ------------  ------------

Cost of revenue:
  Product                    12,155         8,980       42,245        31,866
  Maintenance, support
   and service                3,118         2,301       11,691         9,265
                       ------------  ------------ ------------  ------------
    Total cost of
     revenue                 15,273        11,281       53,936        41,131
                       ------------  ------------ ------------  ------------

Gross profit                 67,723        58,951      253,381       190,101
                       ------------  ------------ ------------  ------------

Operating expenses:
  Sales and marketing        29,940        23,005      105,580        73,067
  Research and
   development               14,221         9,330       51,483        35,565
  General and
   administrative             6,073         4,286       21,844        15,071
  Merger and
   integration-related
   costs                          -           223          300           223
                       ------------  ------------ ------------  ------------
    Total operating
     expenses                50,234        36,844      179,207       123,926
                       ------------  ------------ ------------  ------------

Income from operations       17,489        22,107       74,174        66,175

Other (expense)
 income, net                    (91)           27         (238)          381

Income before
 provision for income
 taxes                       17,398        22,134       73,936        66,556
                       ------------  ------------ ------------  ------------

Provision for income
 taxes                        8,681         7,624       29,576        23,519
                       ------------  ------------ ------------  ------------

Net income             $      8,717  $     14,510 $     44,360  $     43,037
                       ============  ============ ============  ============

Net income per share:
  Basic                $       0.13  $       0.23 $       0.67  $       0.69
  Diluted              $       0.12  $       0.21 $       0.63  $       0.63

Weighted average
 number of common
 shares used in the
 calculation of net
 income per share:
  Basic                  67,314,606    63,867,523   66,346,008    62,002,543
  Diluted                70,679,690    69,418,243   70,902,293    67,915,525



                             Acme Packet, Inc.
                   Condensed Consolidated Balance Sheets
                               (in thousands)
                                (unaudited)

                                                December 31,   December 31,
                                                    2011           2010
                                               -------------  -------------
                    Assets

Current assets:
  Cash and cash equivalents                    $     160,403  $      91,669
  Short-term investments                             191,672        179,024
  Accounts receivable, net                            59,739         34,797
  Inventory                                           10,246          6,662
  Deferred product costs                               1,515          3,572
  Deferred tax asset                                   4,809          3,814
  Income taxes receivable                              4,341          9,979
  Other current assets                                 4,385          3,231
                                               -------------  -------------
    Total current assets                             437,110        332,748
Long-term investments                                 20,096          5,030
Property and equipment, net                           26,252         17,156
Acquired intangible assets, net                        8,569          9,468
Goodwill                                               3,778              -
Deferred tax asset, net                               18,371         14,802
Other assets                                             230            940
                                               -------------  -------------
  Total assets                                 $     514,406  $     380,144
                                               =============  =============

     Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable                             $      10,318  $       7,161
  Accrued expenses and other current
   liabilities                                        12,715         14,629
  Deferred revenue                                    22,261         31,998
                                               -------------  -------------
    Total current liabilities                         45,294         53,788
                                               -------------  -------------

Deferred revenue                                       2,049          1,546
                                               -------------  -------------
Deferred rent                                          4,533          4,265
                                               -------------  -------------

Stockholders' equity:
  Common stock                                            74             71
  Additional paid-in capital                         363,769        266,114
  Treasury stock, at cost                            (37,522)       (37,522)
  Accumulated other comprehensive income                   1             34
  Retained earnings                                  136,208         91,848
                                               -------------  -------------
    Total stockholders' equity                       462,530        320,545
                                               -------------  -------------
Total liabilities and stockholders' equity     $     514,406  $     380,144
                                               =============  =============



               Condensed Consolidated Statements of Cash Flow
                               (in thousands)
                                (unaudited)

                                  Three Months Ended    Twelve Months Ended
                                     December 31,          December 31,
                                 --------------------  --------------------
                                    2011       2010       2011       2010
                                 ---------  ---------  ---------  ---------
Cash provided by operating
 activities                      $  18,695  $  22,370  $  55,341  $  55,119
Cash used in investing
 activities                        (34,550)   (60,995)   (49,036)  (114,767)
Cash provided by financing
 activities                         19,296     19,652     62,429     60,846



                              Acme Packet, Inc.
             Statement on Use of Non-GAAP Financial Measures and
   Reconciliation of Non-GAAP Net Income and Non-GAAP Net 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 financial statements 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 income", "net income on a non-GAAP basis", "non-GAAP net income per share", "non-GAAP EPS", "net income per share on a non-GAAP basis" and "non-GAAP EPS growth rate". 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 income", "EPS", "GAAP EPS growth rate" or "net 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 integration-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 integration-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 integration-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 income", "non-GAAP EPS" and "non-GAAP net income per share" 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 income", "non-GAAP EPS" and "non-GAAP net income per share" by excluding these other or additional expenses and gains.

Reconciliation of GAAP to Non-GAAP Financial Measures for the Three and Twelve Months Ended December 31, 2011 and December 31, 2010 and the Three Months Ended September 30, 2011:

 
                              Acme Packet, Inc.
            Reconciliation of GAAP to Non-GAAP Financial Measures
                    Three Months Ended December 31, 2011
                    (in thousands, except per share data)
                                 (unaudited)


                                      Stock-based
                                     compensation
                                      expense and  Amortization
                                        related     of acquired
                                        payroll     intangible
                              GAAP       taxes        assets     Non-GAAP(1)
                           -------------------------------------------------
Cost of revenue:
    Product                $  12,155 $       (314) $       (385) $    11,456
    Maintenance, support
     and service               3,118         (577)            -        2,541

Operating expenses:
    Sales and marketing       29,940       (4,857)         (100)      24,983
    Research and
     development              14,221       (3,063)          (11)      11,147
    General and
     administrative            6,073       (1,574)            -        4,499

Provision for income taxes     8,681        1,148           174       10,003

Net income                 $   8,717 $      9,237  $        322  $    18,276

Net income per share:
  Basic                    $    0.13 $       0.14  $       0.00  $      0.27
  Diluted                  $    0.12 $       0.13  $       0.00  $      0.26



                              Acme Packet, Inc.
            Reconciliation of GAAP to Non-GAAP Financial Measures
                    Twelve Months Ended December 31, 2011
                    (in thousands, except per share data)
                                 (unaudited)


                            Stock-based
                           compensation
                            expense and  Amortization   Merger and
                              related     of acquired  integration-
                              payroll     intangible      related      Non-
                    GAAP       taxes        assets         costs     GAAP(1)
                  ----------------------------------------------------------
Cost of revenue:
    Product       $ 42,245 $     (1,230) $     (1,677) $          -  $39,338
    Maintenance,
     support and
     service        11,691       (2,095)            -             -    9,596

Operating
 expenses:
    Sales and
     marketing     105,580      (17,661)         (387)            -   87,532
    Research and
     development    51,483      (10,886)          (45)            -   40,552
    General and
     administrative 21,844       (5,472)            -             -   16,372
    Merger and
     integration-
     related
     costs             300            -             -          (300)       -

Provision for
 income taxes       29,576       11,022           755            43   41,396

Net income        $ 44,360 $     26,322  $      1,354  $        257  $72,293

Net income per
 share:
  Basic           $   0.67 $       0.40  $       0.02  $       0.00  $  1.09
  Diluted         $   0.63 $       0.37  $       0.02  $       0.00  $  1.02



                              Acme Packet, Inc.
            Reconciliation of GAAP to Non-GAAP Financial Measures
                    Three Months Ended December 31, 2010
                    (in thousands, except per share data)
                                 (unaudited)


                            Stock-based
                           compensation
                            expense and  Amortization   Merger and
                              related     of acquired  integration-
                              payroll     intangible      related      Non-
                    GAAP       taxes        assets         costs     GAAP(1)
                  ----------------------------------------------------------
Cost of revenue:
    Product       $  8,980 $       (228) $       (399) $          -  $ 8,353
    Maintenance,
     support and
     service         2,301         (354)            -             -    1,947

Operating
 expenses:
    Sales and
     marketing      23,005       (2,156)          (45)            -   20,804
    Research and
     development     9,330       (1,369)          (11)            -    7,950
    General and
     administrative  4,286         (726)            -             -    3,560
    Merger and
     integration-
     related
     costs             223            -             -          (223)       -

Provision for
 income taxes        7,624        1,735           163             -    9,522

Net income        $ 14,510 $      3,098  $        292  $        223  $18,123

Net income per
 share:
  Basic           $   0.23 $       0.05  $       0.00  $       0.00  $  0.28
  Diluted         $   0.21 $       0.04  $       0.00  $       0.00  $  0.26



                              Acme Packet, Inc.
            Reconciliation of GAAP to Non-GAAP Financial Measures
                    Twelve Months Ended December 31, 2010
                    (in thousands, except per share data)
                                 (unaudited)


                           Stock-based
                          compensation
                           expense and  Amortization   Merger and
                             related     of acquired  integration-
                             payroll     intangible      related      Non-
                    GAAP      taxes        assets         costs      GAAP(1)
                  ----------------------------------------------------------
Cost of revenue:
    Product       $31,866 $       (805) $     (1,536) $          -  $ 29,525
    Maintenance,
     support and
     service        9,265       (1,117)            -             -     8,148

Operating
 expenses:
    Sales and
     marketing     73,067       (7,635)         (180)            -    65,252
    Research and
     development   35,565       (5,112)          (44)            -    30,409
    General and
     admin-
     istrative     15,071       (2,541)            -             -    12,530
    Merger and
     integration-
     related
     costs            223            -             -          (223)        -

Provision for
 income taxes      23,519        6,605           630             -    30,754

Net income        $43,037 $     10,605  $      1,130  $        223  $ 54,995

Net income per
 share:
  Basic           $  0.69 $       0.17  $       0.02  $       0.00  $   0.89
  Diluted         $  0.63 $       0.16  $       0.02  $       0.00  $   0.81



                              Acme Packet, Inc.
            Reconciliation of GAAP to Non-GAAP Financial Measures
                    Three Months Ended September 30, 2011
                    (in thousands, except per share data)
                                 (unaudited)


                           Stock-based
                          compensation
                           expense and  Amortization   Merger and
                             related     of acquired  integration-
                             payroll     intangible      related      Non-
                    GAAP      taxes        assets         costs      GAAP(1)
                  ----------------------------------------------------------
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 and
     integration-
     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



                              Acme Packet, Inc.
                           Other Operational Data
                                 (unaudited)

                                 Three Months Ended      Twelve Months Ended
                           ----------------------------- -------------------
                            December September  December  December  December
                            31, 2011  30, 2011  31, 2010  31, 2011  31, 2010
                           ----------------------------- -------------------
Other operational data:
Depreciation and
 amortization (in
 thousands)                $   2,944 $   2,835 $   2,177 $  10,031 $   8,003
Capital expenditures (in
 thousands)                    4,186     5,570     2,770    16,998    13,316
Days sales outstanding            65        65        45         -         -
Total headcount                  752       741       570         -         -
Quarterly inventory
 turnover - annualized          4.41      3.27      5.55         -         -
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