SAN JOSE, CA / ACCESSWIRE / November 28, 2018 / Altigen Communications, Inc. (OTCQB: ATGN), a Silicon Valley-based provider of Hosted Skype for Business and Contact Center solutions, announced today its financial results for the fourth quarter and fiscal year ended September 30, 2018.
Fourth Quarter Fiscal 2018 Financial Highlights
- Total revenue of $2.7 million, growth of 27% over the prior year fourth quarter
- GAAP net income was $9.0 million, including a benefit to income taxes arising from the release of the valuation allowance for deferred tax assets of $8.7 million
- Non-GAAP net income was $614,000
Fiscal Year 2018 Financial Highlights
- Total revenue of $10.0 million, growth of 19% year-over-year
- GAAP net income was $9.8 million, including a benefit to income taxes arising from the release of the valuation allowance for deferred tax assets of $8.7 million
- Non-GAAP net income was $1.8 million
- Working capital increased 50% to $2.3 million
''Our results demonstrate our continued success in transitioning to a cloud communications company'', said Jeremiah Fleming, President & CEO. ''While we have a lot of work to do, we've now built the foundation upon we can deliver profitable growth.''
Fourth Quarter Fiscal Year 2018 Financial Results
Revenue for fiscal 2018 fourth quarter grew 27% to $2.7 million, in comparison to $2.1 million in the prior year quarter. Gross margin decreased 150 basis points to 83.1% for the fourth quarter of fiscal year 2018, compared to 84.6% in the fourth quarter of fiscal 2017.
GAAP net income for the fourth quarter of fiscal 2018 was $9.0 million, or $0.36 per diluted share, compared with GAAP net income of $212,000, or $0.01 per diluted share, for the comparable period of the prior year. The increase was driven by the impact of the release of a deferred tax asset valuation allowance as noted below. Non-GAAP net income for the fourth quarter of fiscal 2018 was $614,000, or $0.02 per diluted share, compared with non-GAAP net income of $231,000, or $0.01 per diluted share for the fourth quarter of fiscal 2017.
GAAP operating expenses for the fourth quarter of fiscal 2018 increased $315,000, or 20% to $1.9 million, compared to $1.6 million during the same period a year ago. Expenses increased primarily due to a $262,000 litigation accrual recognized in the fourth quarter of fiscal 2018, in connection with the pending CTI complaint filed against the Company in March 2016 discussed below. 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, 2018. Non-GAAP operating expenses for the fourth quarter of fiscal 2018 totaled $1.6 million, the same as in the prior-year quarter.
Full Year Fiscal 2018 Financial Results
For the twelve months ended September 30, 2018, revenue grew 19% to $10.0 million, in comparison to $8.4 million for fiscal 2017. Gross margin decreased 140 basis points to 83.5% for the twelve-month period of fiscal 2017, compared to 84.9% in the comparable period last year.
GAAP net income for fiscal 2018 was $9.8 million, or $0.40 per diluted share, compared with GAAP net income of $379,000, or $0.02 per share for fiscal 2017.
The increase was driven by the impact of the release of a deferred tax asset valuation allowance as noted below. Non-GAAP net income for fiscal 2018 was $1.8 million, or $0.07 per diluted share, compared with non-GAAP net income of $546,000, or $0.02 per diluted share for fiscal 2017.
For the full-year 2018, GAAP operating expenses increased $479,000, or 7% to $7.2 million, compared to $6.7 million for the full-year 2017. The increase was primarily attributable to a $604,000 litigation accrual recognized in the second half of fiscal 2018, in connection with the pending CTI complaint filed against the Company in March 2016 discussed below. 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, 2018. Non-GAAP operating expenses for fiscal 2018 totaled $6.5 million, the same as in the prior year period.
Balance Sheet
Total assets increased during the quarter to $14.4 million at September 30, 2018, as compared to $4.4 million at September 30, 2017. A significant portion of the $10.0 million year-over-year increase related to the deferred tax assets recorded amounting to $8.7 million at September 30, 2018, due primarily to the aforementioned valuation allowance reversal.
Our cash, cash equivalents and restricted cash decreased $796,000, or 21% to $3.1 million at September 30, 2018, compared to $3.9 million in the comparable period last year. Working capital was $2.3 million at September 30, 2018, representing a 50% increase from $1.5 million at September 30, 2017.
Deferred Tax Asset
The Company's fourth quarter 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. The Company has performed a continuing evaluation of its deferred tax asset valuation allowance on an annual basis. The Company has now concluded that, as of September 30, 2018, it is likely that the Company will generate taxable income within the applicable net operating loss carry-forward periods to realize a portion of its deferred tax assets. This conclusion, and the resulting partial reversal of the deferred tax asset valuation allowance, is based upon consideration of a number of factors, including the Company's completion of two consecutive years of profitability.
CTI Litigation
In connection with the CTI litigation, on April 30, 2018, the Court served our financial institution with a Writ of Garnishment restricting the Company's cash in the amount of $724,000 for the judgment and $5,000 in post-judgment interest through April 30, 2018. On August 22, 2018, the Court ordered the funds (approximately $729,000) to be sent into a trust account held by Plaintiff's counsel until further order. On July 25, 2018, the Company and all defendants in the litigation filed a Notice of Appeal in the Colorado appellate court. The appellate briefing is currently scheduled on November 30, 2018. The Company expects that the appeal process could take up to eighteen months to complete. Although the Company intends to vigorously defend itself against the claims asserted, litigations are unpredictable and there can be no assurance that the Company will be successful in its defense against these claims.
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, 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 (877) 407-8031 (domestic) or (201) 689-8031 (international). A live webcast will also be made available at http://www.altigen.com. To access the replay, dial (877) 481-4010 (domestic) or (919) 882-2331 (international), conference ID #41368. 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. (OTCQB: 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 enterprises. Our unique and feature rich Cloud PBX and Multi-channel Contact Center solutions natively integrate with Skype for Business and Office 365 to deliver business-critical functionalities required by SMBs and enterprises. 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, California. 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 our ability to achieve or maintain profitability in the future. 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)
| Fourth Quarter Ended | Twelve Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net revenue | $ | 2,675 | $ | 2,114 | $ | 10,003 | $ | 8,388 | ||||||||
| Gross profit | 2,223 | 1,788 | 8,357 | 7,118 | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development | 647 | 706 | 2,830 | 2,847 | ||||||||||||
| Selling, general & administrative | 981 | 869 | 3,774 | 3,812 | ||||||||||||
| Litigation | 262 | - | 604 | 70 | ||||||||||||
| Operating income | 333 | 213 | 1,149 | 389 | ||||||||||||
| Other income/(expense), net | (1 | ) | (1 | ) | (1 | ) | (7 | ) | ||||||||
| Net income before provision for income taxes | 332 | 212 | 1,148 | 382 | ||||||||||||
| Income tax benefit (expense) | 8,694 | - | 8,692 | (3 | ) | |||||||||||
| Net income | $ | 9,026 | $ | 212 | $ | 9,840 | $ | 379 | ||||||||
| Per share data: | ||||||||||||||||
| Basic | $ | 0.40 | $ | 0.01 | $ | 0.43 | $ | 0.02 | ||||||||
| Diluted | $ | 0.36 | $ | 0.01 | $ | 0.40 | $ | 0.02 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 22,842 | 22,799 | 22,820 | 22,799 | ||||||||||||
| Diluted | 24,872 | 23,930 | 24,767 | 23,555 | ||||||||||||
Altigen Communications, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands)
| September 30, 2018 | September 30, 2017 | |||||||
| Cash, cash equivalents and restricted cash | $ | 3,080 | $ | 3,876 | ||||
| Accounts receivable, net | 531 | 255 | ||||||
| Other current assets | 1,622 | 144 | ||||||
| Net property and equipment | 405 | 46 | ||||||
| Deferred tax asset | 8,713 | - | ||||||
| Other long-term assets | 11 | 31 | ||||||
| Total Assets | $ | 14,362 | $ | 4,352 | ||||
| Current liabilities | $ | 2,928 | $ | 2,741 | ||||
| Long-term liabilities | 221 | 272 | ||||||
| Stockholders' equity | 11,213 | 1,339 | ||||||
| Total liabilities and stockholders' equity | $ | 14,362 | $ | 4,352 | ||||
Reconciliation of GAAP and Non-GAAP Financial Measures (amounts in thousands, except per share data)
| Fourth Quarter Ended | Twelve Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net income (GAAP) | $ | 9,026 | $ | 212 | $ | 9,840 | $ | 379 | ||||||||
| Adjustments: | ||||||||||||||||
| Litigation | 262 | - | 604 | 71 | ||||||||||||
| Deferred tax asset valuation allowance | (8,694 | ) | - | (8,694 | ) | - | ||||||||||
| Depreciation and amortization | 13 | 15 | 45 | 79 | ||||||||||||
| Stock-based compensation | 8 | 4 | 27 | 17 | ||||||||||||
| Net income (Non-GAAP) | $ | 614 | $ | 231 | $ | 1,822 | $ | 546 | ||||||||
| Per share data: | ||||||||||||||||
| Basic | $ | 0.03 | $ | 0.01 | $ | 0.08 | $ | 0.02 | ||||||||
| Diluted | $ | 0.02 | $ | 0.01 | $ | 0.07 | $ | 0.02 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 22,842 | 22,799 | 22,820 | 22,799 | ||||||||||||
| Diluted | 24,872 | 23,930 | 24,767 | 23,555 | ||||||||||||
SOURCE: Altigen Communications, Inc.
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