4/26/2004 - RadiSys Corporation (Nasdaq: RSYS), a leading global provider of advanced embedded systems, reported revenues of $61.1 million for the quarter ended March 31, 2004, a 26% increase from the same period last year, and up 10% from the prior quarter. Net income for the quarter was $2.8 million, or $.15 per diluted share, versus a net loss of $4.2 million, or $.24 per share, a year ago. The results for the quarter include a $3.1 million end of life component inventory sale to one of our major customers. The inventory sale was recorded as revenue but did not generate any gross profit since the inventory was sold at cost.
"I'm very pleased with the results for the quarter as the team continues to focus on our customers and profitable growth," stated Scott Grout, CEO. "We continue to see strengthening in a number of our key markets, particularly the service provider market, which enabled us to deliver another quarter of sequential and year over year revenue growth. Pre-tax earnings are also up nicely, both sequentially and year over year. We also continued to improve our balance sheet as we generated $9 million in cash and reduced cash cycle time to 49 days versus 63 days in the prior quarter."
We achieved twelve 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. Two of the wins are larger, each of which is estimated to produce more than $2 million in revenue per year once in full production. Of the twelve wins, seven were in Commercial Systems, four were in Service Provider Systems, and one was in Enterprise Systems. Design wins ramp into production volume at varying rates; on average the ramp begins about twelve months after the win occurs. The design wins reported this quarter include emerging and existing applications in medical equipment, network security, transaction terminals, and carrier network signaling equipment.
During the quarter, the Company incurred nonrecurring expenses of $614 thousand associated with evaluating a potential acquisition that the Company currently does not anticipate will occur. In addition, the Company reversed $180 thousand of restructuring liabilities. The reversal of restructuring liabilities was primarily attributable to a reduction in future obligations associated with vacated leased facilities. The Company expects to see a similar reversal in restructuring liabilities for the second quarter.
The Company also incurred $177 thousand of expense for stock compensation associated with accounting for shares to be issued under the employee stock purchase plan. Accounting rules require that the Company record stock compensation expense if the plan does not include enough authorized shares at the inception of a given offering to complete all of the purchases associated with that offering. Due to the decrease in the Company's stock price during 2002 and early 2003, and the subsequent recovery since then, an offering consummated in February of 2003 and expiring in August of 2004, is currently projected to fall short of completing the offering by approximately 260,000 shares. The Company did receive shareholder authorization for additional shares in 2003. The Company expects to record the remainder of the stock compensation expense in the following two quarters. The remaining expense is currently estimated to be $380 thousand in the second quarter and $200 thousand in the third quarter of 2004.
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Commenting on the outlook, Scott Grout, CEO, said, "We currently expect to see second quarter revenue of $59 to $61 million, compared to first quarter revenue of $61.1 million, which included $3.1 million of incremental revenue from an end of life component inventory sale to one of our major customers. Diluted earnings per share are expected to be flat or slightly higher than last quarter's results of $.15 per diluted share, again using a 25% tax rate assumption. We have several products that are running at volumes above our planned levels for the first half of the year. Because of this positive trend we are accelerating the movement of these products to a new, low-cost China-based EMS partner. While we are moving these higher volume products to our new Asian partner, we expect our gross margin rate to temporarily decline by about one and a half percentage points. However, we currently expect our gross margin rate to return to more normal levels, specifically 32 to 33 percent, in the following quarter or two as we realize the savings associated with the accelerated outsourcing to Asia."
In closing, Mr. Grout stated "We are very pleased with the Company's performance in the first quarter and I continue to be optimistic about our growth prospects going forward as we continue to partner with our customers to deliver them better products, faster time to market and lower total cost."
RadiSys will provide more details about the reported results and current outlook during a conference call scheduled for 5 PM Eastern Time today. The public is invited to participate in the conference call by either calling 1-800-362-0571, 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 through June 9, 2004 at 1-888-566-0186 or via audio webcast at www.radisys.com.
RadiSys is the leading provider of advanced embedded solutions for the commercial, enterprise, and service provider systems markets. Through intimate customer collaboration, and combining innovative technologies and industry leading architecture, RadiSys helps OEMs bring better products to market faster and more economically. RadiSys products include embedded boards, platforms and systems, which are used in today's complex computing, processing and network intensive applications.
For more information, contact RadiSys at email@example.com or http://www.radisys.com or call 800-950-0044 or 503-615-1100.
RadiSys is a registered trademark.
This press release contains forward-looking statements, including the statements concerning estimated revenue from design wins, and the typical production volume ramp of design wins. Investors are cautioned that not all design wins actually ramp into production, and, if ramped into production, the volumes derived from such design wins may not be as significant as the Company had originally estimated. The determination of a design win is somewhat subjective and is based on information available to the Company at the time of the determination. The Company assumes no responsibility to update investors on the status of announced design wins. Statements about the Company's guidance for the second quarter, particularly with respect to anticipated revenues and earnings in the second quarter, and gross profit margins, 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 the cyclical nature of our customers' businesses; the Company's dependence on a few customers; schedule delays or cancellations in design wins; the Company's dependence on a few suppliers; intense competition; execution of the development or production ramp for design wins; political, economic and regulatory risks associated with international operations, including interest rate and currency exchange rate fluctuations; the inability to protect RadiSys' intellectual property or successfully defend against infringement claims by others; 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, 2003, a copy of which may be obtained by contacting the Company's investor relations department at 503-615-7797 or at the Company's investor relations website at http://www.radisys.com. Although forward-looking statements help provide complete information about RadiSys, investors should keep in mind that forward-looking statements are inherently less reliable than historical information.
All information in this release is as of April 22, 2004. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
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