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Altigen Communications, Inc. Reports 2019 Fourth Quarter and Full Year Results

MILPITAS, CA / ACCESSWIRE / December 3, 2019 / Altigen Communications, Inc. (ATGN), a Silicon Valley based Microsoft ISV and Cloud Solutions provider, announced today its financial results for the fourth quarter and fiscal year ended September 30, 2019.

Full Year Fiscal 2019 Financial Highlights

  • Total revenue of $10.6 million
  • Cloud revenue of $6.2 million
  • Operating income was $2.1 million
  • Cash and cash equivalents of $4.4 million at Sept. 30, 2019

Fourth Quarter Fiscal 2019 Financial Highlights

  • Total revenue of $2.7 million
  • Cloud revenue of $1.6 million
  • Operating income was $554,000

"Fiscal 2019 represented a strong financial performance and marked our 3rd consecutive year of profitable growth. As we continued our transition to the cloud, we experienced a 31% decline in one-time revenue. Despite those headwinds, which are a natural by-product of a conversion to monthly recurring revenue, overall company revenue grew by 6%, primarily as a result of our 24% increase in cloud revenue."

"We also achieved a number of important milestones during the year, including extending our service and support agreement with our largest strategic partner, Fiserv; acquiring the customer base of WorkSpace Communications, which will contribute to our growth in the Microsoft UC space; and the launch of a new Direct Routing (SIP trunk) service, the first of many new solutions for Microsoft Teams."

Adoption of the New Revenue Recognition Standard - ASC 606

During the first quarter of fiscal 2019, the Company adopted accounting standard ASC 606, Revenue From Contracts With Customers ("ASC 606"). The adoption of ASC 606 did not have a material impact to our Condensed Consolidated Statement of Operations presented herein. Refer to our upcoming Annual Report for fiscal year ended September 30, 2019 for further details.

Full Year Fiscal 2019 Financial Results

Net Revenue: For the twelve months ended September 30, 2019, total revenue grew 6% to $10.6 million, in comparison to $10.0 million for fiscal 2018. Revenue consisted of:

  • Cloud services revenue of $6.2 million, an increase of 24% compared to fiscal 2018.
  • Software assurance revenue of $2.9 million, a decrease of 9% compared to fiscal 2018.
  • Software and professional services revenue of $1.5 million, a decrease of 14% compared to fiscal 2018.

Gross Margin: Total gross margin decreased 210 basis points to 81.4% for the twelve-month period of fiscal 2019, compared to 83.5% in the comparable period last year, driven primarily by a shift in our product mix, and to a lesser extent, higher amortization of capitalized software and acquisition related costs.

GAAP Net Income: For fiscal 2019, GAAP net income was $1.9 million, or $0.07 per diluted share, compared with GAAP net income of $9.8 million, or $0.40 per diluted share for fiscal 2018. The Company's fourth quarter fiscal 2019 financial results include a non-cash tax expense of approximately $285,000. The tax expense differs from the federal statutory rate of 21% primarily due to an increase in the amount of net operating losses expected to be utilized before expiration. Fiscal 2018 financial results include a one-time non-cash income tax benefit of approximately $8.7 million related to the release of the tax valuation allowance previously recorded against a significant portion of the Company's deferred tax assets.

Non-GAAP Net Income: Non-GAAP net income for fiscal 2019 was $2.5 million, or $0.10 per diluted share, compared with non-GAAP net income of $1.8 million, or $0.07 per diluted share for fiscal 2018.

GAAP Operating Expenses: For the full-year 2019, GAAP operating expenses decreased $703,000, or 10% to $6.5 million, compared to $7.2 million for the full-year 2018. The decrease was primarily attributable to a $604,000 litigation accrual recognized in the second half of fiscal 2018, in connection with the pending CTI complaint. For additional information, please refer to the Company's filings with the OTCQB over-the-counter market, including the Company's most recent Quarterly Report filed on August 16, 2019.

Non-GAAP Operating Expenses: Non-GAAP operating expenses for fiscal 2019 decreased $236,000, or 4% to $6.3 million, compared to $6.5 million in fiscal 2018.

Fourth Quarter Fiscal Year 2019 Financial Results

Net Revenue: Fourth quarter total revenue was $2.7 million in both fiscal 2019 and 2018. Fourth quarter revenue consisted of:

  • Cloud services revenue of $1.6 million, an increase of 15% compared to a year ago.
  • Software assurance revenue of $712,000, a decrease of 6% compared to a year ago.
  • Software and professional services revenue of $352,000, a decrease of 33% compared to a year ago.

Gross Margin: Gross margin decreased 280 basis points to 80.3% in the fourth quarter of fiscal 2019, from 83.1% in the prior-year quarter, driven primarily by a shift in our product mix, and to a lesser extent, higher amortization of capitalized software and acquisition related costs.

GAAP Net Income: For the fourth quarter of fiscal 2019, GAAP net income was $290,000, or $0.01 per diluted share, compared with GAAP net income of $9.0 million, or $0.36 per diluted share, for the comparable period of the prior year. The Company recorded a non-cash tax expense of approximately $285,000 for the three months ended September 30, 2019. The tax expense differs from the federal statutory rate of 21% primarily due to an increase in the amount of net operating losses expected to be utilized before expiration. The Company's fourth quarter fiscal 2018 financial results include a one-time non-cash income tax benefit of approximately $8.7 million related to the release of the tax valuation allowance recorded against a significant portion of the Company's deferred tax assets.

Non-GAAP Net Income: Non-GAAP net income for the fourth quarter of fiscal 2019 was $635,000, or $0.02 per diluted share, compared with non-GAAP net income of $614,000, or $0.02 per diluted share for the fourth quarter of fiscal 2018.

GAAP Operating Expenses: GAAP operating expenses for the fourth quarter of fiscal 2019 decreased $306,000, or 16% to $1.6 million, compared to $1.9 million during the same period a year ago, driven primarily by lower litigation expenses in connection with the pending CTI complaint. For additional information, please refer to the Company's filings with the OTCQB over-the-counter market, including the Company's most recent Quarterly Report filed on August 16, 2019.

Non-GAAP Operating Expenses: Non-GAAP operating expenses for the fourth quarter of fiscal 2019 totaled $1.6 million, the same as in the prior-year quarter.

Balance Sheet

Our cash and cash equivalents increased $1.3 million, or 41% to $4.4 million at September 30, 2019, compared to $3.1 million in the comparable period last year. Working capital was $3.3 million at September 30, 2019, representing a 45% increase from $2.3 million at September 30, 2018.

Non-GAAP Financial Measures

In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of our core operating performance on a period-to-period basis. The excluded items represent stock-based compensation expense, depreciation and amortization expenses and other non-recurring or unusual items that may arise from time to time that we do not consider to be directly related to core operating performance. We use non-GAAP measures to evaluate the core operating performance of our business and to perform financial planning. Since we find these measures to be useful, we believe that investors benefit from seeing results reviewed by management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by facilitating: (i) the comparability of our on-going operating results over the periods presented and (ii) the ability to identify trends in our underlying business.

The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:

Stock-based compensation expense

Stock-based compensation expense is impacted by the Company's future hiring and retention needs and the future fair market value of the Company's common stock, all of which are difficult to predict and subject to constant change. Furthermore, stock-based compensation expense is generally fixed at the time of grant, then amortized over a period of several years, and generally cannot be changed or influenced by management after the grant. The Company believes that the exclusion of stock-based compensation expense assists investors in the comparisons of operating results to peer companies. Stock-based compensation expense can vary significantly based on the timing, size and nature of awards granted.

Depreciation and amortization expenses

Depreciation and amortization expense includes the depreciation of property and equipment, amortization of capitalized software, as well as amortization of intangible assets. Such expenses are fixed at the time of an acquisition, then amortized over a period of several years. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent non-cash current period expense which vary widely from company to company. Management believes that the exclusion of depreciation and amortization expense provides a supplemental measure of the Company's ongoing operating performance.

Other non-recurring or unusual charges

The Company has excluded certain other expenses that are the result of other, non-comparable events to measure operating performance. These events arise outside of the ordinary course of continuing operations. Given the unique nature of the matters relating to these costs, the Company believes these items are not normal operating expenses. For example, legal settlements and judgments vary significantly, in their nature, size and frequency, and, due to this volatility, the Company believes the costs associated with legal settlements and judgments are not normal operating expenses. The Company believes that the exclusion of such out-of-the-ordinary-course amounts provides supplemental information to assist in the comparison of the financial results of the Company from period to period and, therefore, provides useful supplemental information to investors.

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation. They should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Conference Call

Altigen will be discussing its financial results and outlook on a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. ET). The conference call can be accessed by dialing (844) 369-8770 (domestic) or (862) 298-0840 (international). A live webcast will also be made available at www.altigen.com. To access the replay, dial (877) 481-4010 (domestic) or (919) 882-2331 (international), conference ID #56860. A web archive will be made available at www.altigen.com for 90 days following the call's conclusion.

About Altigen Communications

Altigen Communications, Inc. (ATGN), a leading Microsoft Cloud Solutions provider, delivers fully managed Unified Communications services, combining Hosted Skype for Business, Advanced Cloud PBX, and Innovative Cloud Contact Center applications with seamless integration to Office 365 for small-to-medium sized businesses and mid-size to large enterprises. Our robust suite of applications integrate with Skype for Business, Microsoft Teams and Office 365 to deliver unparalleled capabilities to organizations using these Microsoft solutions. With thousands of customers around the world, Altigen solutions are designed for high reliability, ease of use, seamless integration to Microsoft infrastructure technologies, and are built on a scalable, open standards platform. Altigen's worldwide headquarters is in Silicon Valley, CA. For more information, call 1-888- ALTIGEN or visit the web site at www.altigen.com.

Safe Harbor Statement

This press release contains forward‐looking information. The statements are based on reasonable assumptions, beliefs and expectations of management and the Company provides no assurance that actual events will meet management's expectations. Furthermore, the forward-looking statements contained in this press release are based on the Company's views of future events and financial performances which are subject to known and unknown risks and uncertainties including, but not limited to, those relating to our service and support agreement with Fiserv, our ability to achieve or maintain profitability in the future, our ability to continue to drive cloud revenue growth, our ability to attain sales growth in the Microsoft UC space, and our ability to successfully market our new solutions for Microsoft Teams. There can be no assurances that the Company will achieve expected results, and actual results may be materially different than expectations and from those stated or implied in forward-looking statements.

Please refer to the Company's most recent Annual Report filed with the OTCQB over-the-counter market for a further discussion of risks and uncertainties. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. The Company does not undertake any obligation to update any forward-looking statements.

Contact:
Carolyn David
Vice President of Finance
Altigen Communications, Inc.
Phone: 408-597-9033
www.altigen.com

ALTIGEN COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data; audited)

Three Months Ended Twelve Months Ended
September 30, September 30,
2019 2018 2019 2018
Net revenue
$ 2,662 $ 2,675 $ 10,632 $ 10,002
Gross profit
2,138 2,223 8,652 8,357
Operating expenses:
Research and development
630 647 2,565 2,830
Selling, general & administrative
954 981 3,927 3,774
Litigation
- 262 13 604
Operating income
554 333 2,147 1,149
Other income/(expense), net
10 (1 ) 62 (1 )
Net income before provision for income taxes
564 332 2,209 1,148
Income tax benefit (expense)
(274 ) 8,694 (292 ) 8,692
Net income
$ 290 $ 9,026 $ 1,917 $ 9,840
Per share data:
Basic
$ 0.01 $ 0.40 $ 0.08 $ 0.43
Diluted
$ 0.01 $ 0.36 $ 0.07 $ 0.40
Weighted average shares outstanding:
Basic
22,903 22,842 22,875 22,820
Diluted
25,862 24,872 25,658 24,767

ALTIGEN COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, audited)

September 30, 2019 September 30, 2018
Cash and cash equivalents
$ 4,357 $ 3,080
Accounts receivable, net
371 531
Other current assets
287 1,622
Property and equipment, net
1,238 405
Intangible assets, net
395 -
Deferred tax asset
8,453 8,713
Other long-term assets
36 11
Total assets
$ 15,137 $ 14,362
Current liabilities
$ 1,678 $ 2,928
Long-term liabilities
295 221
Stockholders' equity
13,164 11,213
Total liabilities and stockholders' equity
$ 15,137 $ 14,362

ALTIGEN COMMUNICATIONS, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(amounts in thousands, except per share data; audited)

Three Months Ended Twelve Months Ended
September 30, September 30,
2019 2018 2019 2018
Reconciliation of GAAP to Non-GAAP Gross Profit:
GAAP gross profit
$ 2,138 $ 2,223 $ 8,652 $ 8,357
Amortization of capitalized software
27 1 54 6
Acquisition related expenses
11 - 11 -
Non-GAAP gross profit
$ 2,176 $ 2,224 $ 8,717 $ 8,363
Reconciliation of GAAP to Non-GAAP Expenses:
GAAP operating expenses
$ 1,584 $ 1,890 $ 6,505 $ 7,208
Litigation
- 262 13 604
Section 382 study (1)
- - 68 -
Depreciation and amortization
10 13 47 45
Amortization of capitalized software
19 - 61 -
Stock-based compensation
4 8 20 27
Non-GAAP operating expenses
$ 1,551 $ 1,607 $ 6,296 $ 6,532
Reconciliation of GAAP to Non-GAAP Net Income:
GAAP net income
$ 290 $ 9,026 $ 1,917 $ 9,840
Litigation
- 262 13 604
Section 382 study (1)
- - 68 -
Depreciation and amortization
10 13 47 45
Amortization of capitalized software
46 1 115 6
Stock-based compensation
4 8 20 27
Acquisition related expenses
11 - 11 -
Deferred tax asset valuation allowance (2)
274 (8,694 ) 274 (8,694 )
Non-GAAP net income
$ 635 $ 616 $ 2,465 $ 1,828
Per share data:
Basic
$ 0.03 $ 0.03 $ 0.11 $ 0.08
Diluted
$ 0.02 $ 0.02 $ 0.10 $ 0.07
Weighted average shares outstanding:
Basic
22,903 22,842 22,875 22,820
Diluted
25,862 24,872 25,658 24,767
  1. During the first quarter of fiscal 2019, the Company performed a section 382 ownership change analysis to determine if there were any limitations on the utilization of its NOLs.
  2. The Company's fourth quarter fiscal 2019 financial results include a non-cash tax expense of approximately $285,000. The tax expense differs from the federal statutory rate of 21% primarily due to an increase in the amount of net operating losses expected to be utilized before expiration. The Company's fourth quarter fiscal 2018 financial results include the reversal of a portion of the valuation allowance recorded against the deferred tax assets of the Company. This reversal resulted in the recognition of a one-time income tax benefit in the fourth quarter of fiscal 2018 of $8.7 million.

SOURCE: Altigen Communications, Inc.



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