Shoretel reports financial results for Q2 2010
by Jan Harris
January 28, 2010
ShoreTel, Inc., (NASDAQ: SHOR) today announced financial results for the second quarter of fiscal year 2010, which ended December 31, 2009.
For the second quarter of fiscal year 2010, revenue was $35.5 million, up 5 percent sequentially from the first quarter of fiscal 2010 and up slightly from the second quarter of fiscal year 2009.
GAAP net loss was $(2.5) million, or $(0.06) per share, compared to a GAAP net loss of $(2.3) million, or $(0.05) per share, reported in the second quarter of fiscal 2009.
Excluding stock-based compensation expenses of $2.8 million and related tax adjustments, non-GAAP net income for the second quarter of fiscal year 2010 was $0.3 million, or $0.01 per diluted share, compared to non-GAAP net income of $0.2 million, or $0.01 per diluted share, reported in the second quarter of fiscal year 2009.
GAAP gross margins for the second quarter of fiscal year 2010 were a record 64.5 percent, compared with 63.1 percent during the same quarter last year.
GAAP gross margins in the second quarter of fiscal year 2010 included $0.3 million in stock-based compensation charges.
Non-GAAP gross margins, which exclude stock-based compensation charges, were an all-time high of 65.3 percent in the second quarter of fiscal year 2010, up from 63.8 percent in the year-ago quarter.
As of December 31, 2009, the company had $115.0 million in cash, cash equivalents and short-term investments, its highest level in company history.
The company generated approximately $3 million in cash flow from operations during the quarter.
“We are seeing solid growth and an improving market even before the benefits of our strategic investments in sales, R&D, and branding are realized.
“We are very pleased with our second quarter performance, having outperformed our revenue and earnings expectations, posted our all-time highest gross margins, and grown our cash and short-term investments by $3.5 million while making significant investments in our business.
“We also achieved double-digit growth from our national partners, and signed over 800 new customers.
“Looking forward, we expect to build on this positive momentum,” said John W. Combs, chairman and chief executive officer of ShoreTel.
“Our strong second quarter combined with forecasted growth for our industry reinforces the fact that we chose the right time to make these strategic investments in our business.”
Operational Highlights for the Second Quarter of Fiscal Year 2010
ShoreTel 360 Legacy Migration Program Delivers Compelling Offering to Customers with Legacy PBX Systems
ShoreTel recently announced a growing number of enterprises have adopted its ShoreTel 360 Legacy Migration Program, choosing ShoreTel to integrate feature-rich UC capabilities in multi-vendor PBX environments.
Customers have the flexibility to transition gradually and integrate ShoreTel’s solution across their multi-site enterprise while salvaging their legacy PBX investment.
ShoreTel’s brilliantly simple cross-platform solutions have been proven in production deployments with ShoreTel front-ending legacy Nortel, Avaya, Cisco, Ericsson, Fujitsu, Mitel and NEC platforms.
Introduction of ShoreTel 10, the Newest Version of its Unified Communications (UC) Software
The Company recently introduced ShoreTel 10, the latest version of its award-winning UC software. With support for T.38 fax integration, extended multi-site capabilities, and integration with Microsoft Exchange 2007 for messaging via SIP, ShoreTel 10 is ideal for large enterprises looking to increase user productivity and integrate communications into existing investments.
Named Best IP Provider for Sixth Year in a Row
For the sixth year in a row ShoreTel was named the Best IP Telephony Provider in the Nemertes PilotHouse Awards, an end-user survey of customer satisfaction by an independent research advisory firm.
For 2009, ShoreTel was rated the highest in every category, including value, customer service, technology, management tools, installation, and overall, against every competitor, including Cisco, Avaya, Nortel, Microsoft, Mitel and others.
ShoreTel has rated highest in overall satisfaction every year since Nemertes began tracking IP-telephony vendor performance six years ago.
Completes Interoperability Testing with IBM Sametime Unified Telephony
During the quarter, the company completed interoperability testing with IBM Sametime Unified Telephony (SUT) to offer ShoreTel customers the option to access the advanced capabilities of SUT for collaboration and communications.
With this validation, ShoreTel extends its feature-rich capabilities to organizations that use IBM SUT client and bridges the gap with seamless integration between the ShoreTel phone system and the IBM Sametime environment.
UC features made available with IBM SUT include presence information so end-users can see if a contact is free to take a call, call alerts, and call routing for improved flexibility.
The company is providing the following outlook for the quarter ending March 31, 2010
* Revenue is expected to be in the range of $33 to $36 million
* GAAP gross margins are expected to be in the range of 63 to 64 percent, including approximately $300,000 in stock-based compensation expenses. Non-GAAP gross margins are expected to be in the range of 63.5 to 64.5 percent
* GAAP operating expenses are expected to be in the range of $28.0 to $29.0 million, which includes approximately $2.5 million in stock-based compensation expenses. Non-GAAP operating expenses are expected to be in the range of $25.5 to $26.5 million
Use of Non-GAAP Financial Measures
ShoreTel reports all financial information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult to understand if limited to reviewing only GAAP financial measures.
Many investors have requested that ShoreTel disclose this non-GAAP information because it is useful in understanding the company’s performance as it excludes non-cash and other special charges that many investors feel may obscure the company’s true operating performance.
Likewise, management uses these non-GAAP financial measures to manage and assess the profitability of its business and does not consider stock-based compensation expenses and other special charges and related tax adjustments in managing its core operations.
ShoreTel has provided a reconciliation of non-GAAP financial measures in the tables of this press release.
Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures with their most directly comparable GAAP financial measure.
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