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Edited Transcript of RSYS earnings conference call or presentation 31-Jul-18 9:00pm GMT

Q2 2018 Radisys Corp Earnings Call

Hillsboro Aug 1, 2018 (Thomson StreetEvents) -- Edited Transcript of Radisys Corp earnings conference call or presentation Tuesday, July 31, 2018 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brian J. Bronson

Radisys Corporation - President, CEO & Director

* Jonathan Wilson

Radisys Corporation - CFO, VP of Finance & Corporate Secretary

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to Radisys second quarter earnings conference call with Brian Bronson, Radisys' President and Chief Executive Officer; and Jon Wilson, Radisys' Chief Financial Officer. As a reminder, this call is being recorded. Mr. Wilson, you may begin.

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Jonathan Wilson, Radisys Corporation - CFO, VP of Finance & Corporate Secretary [2]

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Good afternoon, everyone, and thanks for joining us on the call. Today, we will provide a brief overview of our second quarter business and financial highlights as well as a few comments on the definitive agreement with Reliance Industries Limited. Given the pending acquisition, we will not be conducting a question-and-answer session during today's call.

Let me caution you that any forward-looking statements regarding the company made during the call involve a number of risks and uncertainties, and therefore, we caution you not to place undue reliance on them. Factors that may cause actual results to differ materially from those in our forward-looking statements are discussed in today's earnings release and in our SEC filings, most recently in our Form 10-Q for the quarter ended March 31, 2018. All information provided in this call is as of today. Radisys undertakes no duty to update any forward-looking statement to conform to actual results or changes in the company's expectations.

During the call, we will discuss certain non-GAAP measures and have provided a GAAP to non-GAAP reconciliation in today's earnings release.

Let me now transition to an update on our second quarter results. Second quarter revenue was $24.4 million compared to $26.2 million in the first quarter, as lower hardware solutions revenue was partially offset by 20% sequential growth in Software-Systems' revenue. Non-GAAP gross margin was 45.3% compared to 32.8% in the first quarter, resulting from an improved mix of revenues between our segments as our Software-Systems segment represented over 50% of total revenue. And non-GAAP net income was $2.2 million or $0.06 per diluted share as compared to a net loss of $3.3 million or a loss of $0.08 per share in the first quarter. Note that second quarter non-GAAP net income benefited from the impact of currency fluctuations with a nonoperating income of approximately $1.4 million or $0.03 per diluted share, resulting from the movement of the U.S. dollar against certain foreign currencies during the quarter.

Switching over to sequential changes on the balance sheet. Cash was $9.6 million at quarter-end as compared to $11.4 million at the end of the first quarter, with the reduction associated with payments for our prior restructuring actions as well as committed inventory purchases to suppliers for previously reserved Hardware Solutions products not expected to be sold to customers.

Importantly, commensurate with the announcement of the acquisition by Reliance Industries, we also restructured the terms of our credit agreements with both Hale Capital and Marquette Business Credit. The restructured agreements extended all principal and interest payments on the Hale notes previously due in 2018 to February 2019. Further, the amendment with Marquette maintains the restricted cash requirement of $4 million through October 2018, whereas restricted cash was previously scheduled to increase to $6 million as of July 1, 2018.

For a full description of other terms of the amendments, please refer to our 8-K filing on July 2.

Finally, I would like to note that we will not be providing forward-looking guidance due to the pending acquisition.

With that, let me turn the call over to Brian for further discussion of our results and the pending acquisition by Reliance Industries.

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Brian J. Bronson, Radisys Corporation - President, CEO & Director [3]

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Thanks, Jon, and good afternoon, everyone. Our second quarter results closed above the high end of our expectations as a result of strong execution across the business. Revenue of $24.4 million benefited from better-than-expected near-term results in our legacy hardware business while our software and services business delivered nearly 20% year-on-year growth, largely resulting from early 5G software licensing opportunities. Both gross margins and non-GAAP earnings benefited from the strong revenue performance, resulting in the achievement of non-GAAP profitability during the quarter.

Additionally, at the end of the second quarter, we announced that we entered into a definitive agreement to be acquired by Reliance Industries for $1.72 per share. This is 146% premium relative to our closing price on the date of the announcement on June 29. We expect the transaction to close during the fourth quarter of 2018 after the completion of our shareholder meeting and other regulatory approvals for which initial filings were made last week. For more detailed information on the acquisition, please refer to our preliminary proxy statement filed with the SEC on July 30, 2018.

I do want to take the opportunity to reiterate that we will continue to work independently on driving our future growth and innovation. And importantly, we believe this transaction will help to accelerate our strategy and provide the scale required by our current and prospective customers to adopt the Radisys' full suite of products and services. Moreover, we expect the addition of Reliance's visionary leadership and strong market position will further enhance our ability to develop and integrate large-scale disruptive open-centric end-to-end solutions.

Thanks, everyone, for joining the call and for your continued support of Radisys. We look forward to providing further updates relative to the Reliance acquisition as more details become publicly available.

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Operator [4]

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Thank you, and that concludes today's conference. Thank you all for participating. You may now disconnect.