RadiSys Announces Q2 Results

7/18/2002 - RadiSys Corporation (Nasdaq: RSYS), a leading provider of building blocks, platforms, and applications subsystems enabling next-generation communications systems and embedded computing applications, today reported revenues of $52.2 million for the quarter ended June 30, 2002, down 16% from the second quarter of 2001. The net loss for the quarter was $3.1 million, or $.18 per share (diluted), including previously announced non-recurring charges and a gain on the repurchase of convertible notes. Pro forma net loss, which excludes the aforementioned, was $1.3 million, or $.07 per share (diluted) versus a net loss of $1.6 million, or $.09 per share (diluted), a year ago.

Pro forma cash net loss, was $914 thousand, or $.05 per share (diluted). The Company defines cash loss per share as net loss excluding intangibles amortization of $765 thousand pre-tax.

During the quarter the Company reported non-recurring charges, previously announced on June 10th, of $5.5 million pre-tax, or $.14 per share (diluted) after-tax. The non-recurring charges consist of two components: restructuring expenses and severance-related expenses paid to the Company's former Chairman and CEO. These restructuring actions are expected to result in quarterly savings of about $2.5 million once fully implemented in the fourth quarter of this year.

The Company also recorded a gain this quarter of $1.5 million, or $.04 per share (diluted) after-tax, associated with the repurchase of approximately $12 million principal amount of outstanding 51/2% convertible subordinated notes.

Q2 Highlights
RadiSys achieved 13 new design wins in the quarter. RadiSys characterizes a design win as a project estimated to produce more than $500 thousand in revenue per year when in production. Six of the wins are significantly larger, estimated to produce more than $2 million in revenue per year once in full production. Of these, two are estimated to produce more than $10 million annually once in full production.

Of the 13 wins, 11 are in communications equipment, with three coming from our Savvi gateway product line, and two wins are in embedded computing applications.

Design wins ramp into production volume at varying rates; typically the ramp begins 6-12 months after the win occurs.

"We made significant strides in three critical areas this quarter", stated Ron Dilbeck, CEO. "First, we announced a restructuring that we anticipate will significantly lower our quarterly breakeven point into the high $40 million range. Second, we continued our outstanding performance in managing our assets. Our DSO finished at 59 days, and our turns improved to 5.7. Major improvements in receivables and inventory have allowed us to drop our cash cycle time to 75 days from 81 last quarter and 125 a year ago. We generated $3.3 million in cash flow from operations and retired $12 million in convertible debt at a discount. Lastly, our asset management performance and cost structure actions have enabled us to continue to invest significantly in technology and to continue to bring new products to our customers. Specifically, this quarter we announced our 2.16 compliant CPU product that will be part of Hewlett Packard's blade server alliance program. We are excited about the future potential of this product as well as our new partnership with HP."

Business Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

Commenting on the outlook, Mr. Dilbeck said "We are seeing some recent softening in some of our customers' forecasts and therefore expect third quarter revenue to be down about 10% from Q2. However, even at this lower revenue level, I expect we will be able to show an improvement in earnings over the second quarter."

In closing, Mr. Dilbeck stated "We have spent considerable time and effort to align our cost structure and balance sheet so that we can support our R&D efforts and continue to serve our customers. We have over 200 engineers and close to 700 employees who are all focused on delivering best in class products to our customers."

More details about financial guidance will be given in today's conference call, scheduled for 5 PM Eastern Time. The public is invited to participate in the conference call by either calling 1-877-505-0447, password is RadiSys, or listening via live audio webcast on the RadiSys web-site at www.radisys.com. Replays of the call will be available at 1-800-642-1687, the password is 4801254, or via audio webcast at www.radisys.com

RadiSys designs and manufactures building blocks, platforms and application subsystems for next-generation communications equipment and embedded computing applications. As the leading independent provider to OEMs, RadiSys delivers a time-to-market advantage in a tight "virtual division" relationship with its customers. The span of products ranges from board-level components such as processors, network interfaces, and packet processing engines, to communications middleware software such as signaling and networking protocol stacks, to platforms based on PCI, CompactPCI, and switch-fabrics, to services such as NEBS certification and software and microcode professional services, all the way up to private-label gateway systems. RadiSys' highly differentiated position in the market is a result of its intense focus on Intel-based technology, having the broadest array of building blocks, and a "perfect fit" product development strategy using its intellectual property to design customer subsystems.

RadiSys is a registered trademark. All other products are trademarks or registered trademarks of their respective companies.

This press release contains forward-looking statements, including the statements concerning quarterly cost savings and a lower breakeven point as a result of the restructuring, estimated revenue from design wins and the typical production volume ramp of design wins. Ron Dilbecks' statements about the Company's guidance for Q3, particularly with respect to revenues and earnings in the third quarter, also constitute forward-looking statements. Actual results could differ materially from those projected in these forward-looking statements as a result of a number of risk factors, including business conditions in the general economy and in the markets RadiSys serves, particularly the communications markets; changes in customer order patterns or inventory levels; excess or obsolete inventory and variations in inventory valuation; dependence on the relationship with Intel Corporation and its products; lower than expected or delayed sales by RadiSys' customers; lower than expected design wins with key OEMs; failure of leading OEMs to incorporate RadiSys' solutions in successful products; schedule delays or cancellations in design wins; excess manufacturing capacity; execution of the development or production ramp for design wins; deliveries of products containing errors, defects and bugs; dependence on a limited number of suppliers or, in some cases, one supplier for components and equipment used to manufacture products; competition in the building block markets for internet and communications, electronics assembly and medical equipment, which may lead to lower than expected sales prices for RadiSys' products or reduced sales volume; political, economic and regulatory risks associated with international operations, including interest rate and currency exchange rate fluctuations; the impact of rapid technological and market change; the inability to protect RadiSys' intellectual property or successfully to defend against infringement claims by others; availability of qualified personnel, including at the most senior management levels; technological difficulties and resource constraints encountered in developing new products; difficulty or inability to meet RadiSys' obligations to repay indebtedness; political unrest or instability; disruptions in the general economy and in the Company's business, including disruptions of cash flow and the Company's normal operations, that may result from terrorist attacks or armed conflict, particularly in the Middle East, and other risk factors listed from time to time in RadiSys' SEC reports, including those listed under "Risk Factors" in RadiSys' Annual Report on Form 10-K for the year ended December 31, 2001 and subsequently filed reports. Although forward-looking statements help provide complete information about RadiSys, investors should keep in mind that forward-looking statements are inherently less reliable that historical information.

RadiSys will keep this press release publicly available on its web-site (www.radisys.com). Prior to the start of the quiet period (described below), the public can continue to rely on the guidance provided in this press release on the web-site as still being RadiSys' current expectations on matters covered, unless RadiSys publishes a notice stating otherwise. Beginning September 7, 2002, RadiSys will observe a "quiet period" during which the guidance provided in this press release will no longer constitute the Company's current expectations. During the quiet period, all the information in this press release should be considered to be historical, speaking as of its date only and not subject to update by the Company. During the quiet period, RadiSys representatives will not comment concerning RadiSys' financial results or expectations. The quiet period will continue until the date RadiSys issues its next quarterly earnings release currently scheduled for October 17, 2002.

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