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Dialogic Inc. Reports First Quarter 2011 Financial Results

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^{Published in Science and Technology on Tuesday, May 10th 2011 at 13:11 GMT by Market Wire}  

SAN JOSE, Calif.--([ BUSINESS WIRE ])--Dialogic Inc. (NASDAQ:DLGC), a leading provider of communications technologies that power advanced networks, today announced first quarter financial results for the period ending March 31, 2011.

"During the first quarter of 2011 we have been introduced to significant market opportunities where carriers required a supplier of our post-merger scale. With respect to operating costs, we anticipate achieving a normalized non-GAAP operating expense rate of $120 million on an annualized basis by the third quarter 2011."

aWe have now completed two quarters as a merged business and are very confident in how we have positioned our company for the future,a said Nick Jensen, Dialogica™s Chairman and Chief Executive Officer. aSeveral large deals that had already been booked or got booked during the quarter were not recognized as revenue in Q1. We continue to see good acceptance in the market place for our technology platforms and we expect a significant increase in our second quarter revenue. We are also encouraged by the fact that our book to bill ratio exceeded one for a second consecutive quarter and our backlog reached record levels.a

Financial Results

As reflected below in the reconciliation of the Q1 2011 Statement of Operations to Adjusted EBITDA, on a non-GAAP basis, Dialogic achieved the following financial results for Q1 2011 as compared to the results of Q4 2010:

• Revenue of $45.9 million, as compared to $57.4 million
• Gross Margin of 63%, as compared to 63%
• Operating Expenses of $35.0 million, as compared to $35.2 million
• Adjusted EBITDA of $(6.1) million, as compared to $1.2 million

On a GAAP basis for Q1 2011 as compared to Q4 2010, results were: revenue of $44.9 million, as compared to $55.5 million; gross margins of 57%, as compared to 54%; operating expenses of $42.6 million, as compared to $49.8 million and net loss attributable to common shareholders of $21.3 million or $0.68 per share, as compared to $23.0 million or $0.74 per share.

aTwo of the key drivers for the merger were expansion of market opportunities and reduction of operating cost for the combined company and we are seeing these drivers emergea, said Jensen. aDuring the first quarter of 2011 we have been introduced to significant market opportunities where carriers required a supplier of our post-merger scale. With respect to operating costs, we anticipate achieving a normalized non-GAAP operating expense rate of $120 million on an annualized basis by the third quarter 2011.a

Recent Highlights

Thus far in 2011, Dialogic has launched a number of new products, demonstrated success in new market segments and entered into substantial new customer contracts including:

• Dialogic continued to aggressively market its technology solutions to mobile carriers, particularly in the emerging markets. In Q1 we closed business with a significant number of mobile carriers in India, China, Brazil and Russia, extending our momentum and market share in these key regions.
• Dialogic launched its Mobile Backhaul solution, [ Dialogic® I-Gate® 4000 Session Bandwidth Optimizer Mobile Backhaul (SBO MB) ], that provides significant bandwidth and operating cost saving for mobile carriers and the platform was trialed and endorsed by Telefonica.
• Dialogic launched the Dialogic® BorderNeta" family of session border controllers that address both the carrier and enterprise SIP trunking market.
• Dialogic won what it believes to be the largest video gateway contract ever awarded. This contract is with Aircel in India, through Nokia Siemens Networks. Aircel will be using the[ Dialogic ®Visiona" 1000 Video Gateway ] for its 3G video calling platform to offer advanced mobile services.
• [ Epsilon ], a global connectivity solutions provider, deployed the [ Dialogic® ControlSwitch^TM System ] to replace Epsilona™s existing softswitch platform. Epsilon chose Dialogic because of its ability to provide native support for both TDM and IP traffic via the ControlSwitch System, as well as Dialogica™s strong leadership and expertise within the IP communications market. Using Dialogica™s softswitch solution, Epsilona™s carrier customers can seamlessly migrate from TDM to IP while reducing both CAPEX and OPEX.

Reaffirms Business Outlook for 2011

Today Dialogic reaffirmed its 2011 Business Outlook that was originally issued on February 28, 2011.

aWe made significant progress this quarter and we are encouraged that our vision is on-track and delivering early resultsa said Jensen. aOur solutions are being implemented in the core and edge of some of the largest mobile networks in the world. During the first quarter of 2011, we created four business units organized by market segment to enhance our ability to deliver solutions to those market segments more quickly and efficiently. We believe that our backlog is demonstrating that we are well positioned in key growth markets around the globea.

Use of Non-GAAP Financial Measures

Some of the measures in this press release are non-GAAP financial measures within the meaning of the SEC Regulation G. Dialogic believes that presenting non-GAAP net loss and non-GAAP net loss allocable to common stockholders is useful to investors, because it describes the operating performance of Dialogic. Dialogic management uses these non-GAAP measures as important indicators of the companya™s past performance and in planning and forecasting performance in future periods. Dialogic considers EBITDA, as adjusted, an important measure of its ability to generate cash flows to service debt, fund capital expenditures and fund other corporate investing and financing activities. EBITDA, as adjusted, eliminates the non-cash effect of tangible asset depreciation and amortization of intangible assets and stock-based compensation as well as certain nonrecurring expenses. EBITDA should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities. The non-GAAP financial information Dialogic presents may not be comparable to similarly-titled financial measures used by other companies, and investors should not consider non-GAAP financial measures in isolation from, or in substitution for, financial information presented in compliance with GAAP. You are encouraged to review the reconciliation of non-GAAP financial measures to GAAP financial measures included elsewhere in this press release.

In respect of the foregoing, Dialogic provides the following supplemental information to provide additional context for the use and consideration of the non-GAAP financial measures used elsewhere in this press release:

"EBITDA" is defined as earnings before interest, taxes, depreciation and amortization. "Adjusted EBITDA" is defined as EBITDA plus adjustments for nonrecurring items or other adjustments. Adjusted EBITDA includes EBITDA and also non-cash stock compensation expense, purchase price adjustments resulting from the fair value adjustments of the assets and liabilities of Veraz Networks as of October 1, 2010, acquisition related costs, restructuring expenses and foreign exchange gains (losses). Acquisition costs include investment banker fees, legal expenses, and other fees incurred in connection with the acquisition. Dialogic considers Adjusted EBITDA as a key metric in evaluating its financial performance.

Stock-based compensation: These expenses consist of expenses for employee stock options, restricted stock units and employee stock purchases under ASC 718. Dialogic excludes stock-based compensation expenses from our non-GAAP measures primarily because they are non-cash expenses and are also excluded by our lender in the calculation of EBITDA. As Dialogic applies ASC 718, it believes that it is useful to its investors to understand the impact of the application of ASC 718 to its operational performance, liquidity and its ability to invest in research and development and fund acquisitions and capital expenditures. While stock-based compensation expense calculated in accordance with ASC 718 constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires or will require cash settlement by Dialogic and because such expense is not used by management to assess the core profitability of our business operations. Dialogic further believes these measures are useful to investors in that they allow for greater transparency to certain line items in our financial statements. In addition, excluding this item from various non-GAAP measures better facilitates comparisons to our competitorsa™ operating results.

Conference Call Information

Dialogic will offer a live webcast of the conference call, which will also include forward-looking information. For parties in the United States and Canada, call 1-800-860-2442 to access the conference call. International parties can access the call at 412-858-4600. The webcast will be accessible from the aInvestor Relationsa section of the Dialogic website ([ www.dialogic.com ]). The webcast will be archived for a period of 30 days. A telephonic replay of the conference call will also be available two hours after the call and will run for one month. To hear the replay, parties in the United States and Canada should call 1-877-344-7529 and enter passcode 60000#. International parties should call 1-412-317-0088 and enter passcode 60000#. In addition, Dialoica™s press release will be distributed via Business Wire and posted on the Dialogic website before the conference call begins (DLGC-IR).

About Dialogic

For over 25 years, Dialogic (NASDAQ: DLGC) and its subsidiaries have been providing communications platforms and technology to enterprise and service provider markets. Our portfolio of IP and TDM based multimedia processing and call control technologies enables developers and service providers to build and deploy innovative applications without concern for the complexities of the communications medium or network. This empowers our customers to unleash the profit from video, voice and data for advanced networks. For more information on Dialogic, visit [ www.dialogic.com ].

This press release may contain forward-looking statements regarding future events that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. These forward-looking statements involve risks and uncertainties, as well as assumptions that if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to, future revenues, adjusted gross margin, adjusted EBITDA and other risks and uncertainties described more fully in our documents filed with or furnished to the SEC. More information about these and other risks that may impact Dialogica™s business is set forth in the aRisk Factorsa section in our Annual Report on Form 10-K for the year ended December31, 2010 as filed with the SEC. This filing is available on a website maintained by the SEC [ http://www.sec.gov/ ]. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

Dialogic and I-Gate are registered trademarks and Vision, ControlSwitch and BorderNet are trademarks of Dialogic Inc. or a subsidiary. All other company and product names may be trademarks of the respective companies with which they are associated.