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Altigen Communications, Inc. Reports First Quarter Results for Fiscal Year 2020

MILPITAS, CA / ACCESSWIRE / January 22, 2020 / Altigen Communications, Inc. (OTCQB:ATGN), a Silicon Valley based Microsoft ISV and Cloud Solutions provider, announced today its financial results for the first quarter ended December 31, 2019.

Adoption of the New FASB Lease Accounting Standard (ASC 842)

The Company adopted the new ASC 842 lease accounting standard in the first quarter of 2020, which resulted in the recognition of "Operating right-of-use assets" of $1.1 million and "Operating lease liabilities" of $1.1 million, a portion of which is in current liabilities, as of December 31, 2019. There was no impact on the Company's consolidated statements of operations or cash flows. Refer to our upcoming Quarterly Report for further details.

Financial Results

Net Revenue: Total revenue for the first quarter of fiscal 2020 was $2.84 million, compared to $2.66 million in the preceding quarter, and compared to $2.78 million in the prior year quarter. First quarter revenue consisted of:

  • Cloud services revenue of $1.7 million, representing an increase of 7% and 17%, respectively, compared to the preceding quarter and the prior year period.
  • Software assurance revenue of $722,000, representing an increase of 1% and a decrease of 7%, respectively, compared to the preceding quarter and the prior year period.
  • Software license revenue of $204,000, representing a decrease of 23% and 55%, respectively, compared to the previous quarter and the prior year period.
  • Professional services and other revenue of $214,000, representing an increase of 145% and 139%, respectively, compared to the preceding quarter and the prior year period.

Gross Margin: Gross margin in the first quarter of fiscal 2020 was 77.6%, compared to 80.3% in the preceding quarter, and compared to 82.9% in the prior year quarter. The decrease was primarily driven by higher amortization of capitalized software and acquisition related costs, and to a lesser extent, a shift in our product mix.

GAAP Net Income: For the first quarter of fiscal 2020, GAAP net income was $502,000, or $0.02 per diluted share, compared with GAAP net income of $290,000, or $0.01 per diluted share in the preceding quarter, and compared with GAAP net income of $612,000, or $0.02 per diluted share in the same period in 2019. As previously disclosed, the Company's fourth quarter fiscal 2019 financial results include a non-cash tax expense of approximately $285,000. The tax expense differs from the federal statutory rate of 21% primarily due to an increase in the amount of net operating losses expected to be utilized before expiration.

Non-GAAP Net Income: Non-GAAP net income for the first quarter of fiscal 2020 was $621,000, or $0.02 per diluted share, compared with non-GAAP net income of $635,000, or $0.02 per diluted share in the preceding quarter, and compared with non-GAAP net income of $736,000, or $0.03 per diluted share in the same period a year ago, representing a slight decrease of 2% and 16%, respectively, primarily as a result of lower gross margin.

GAAP Operating Expenses: GAAP operating expenses totaled $1.7 million for the first quarter of fiscal 2020, compared with $1.6 million in the preceding quarter, and compared with $1.7 million during the same period a year ago.

Non-GAAP Operating Expenses: Non-GAAP operating expenses for the first quarter of fiscal 2020 totaled $1.7 million, compared with $1.6 million in the preceding quarter, and $1.6 million in the comparable period last year.

Balance Sheet

As of December 31, 2019, cash and cash equivalents totaled $4.4 million and working capital was $3.4 million.

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, amortization of capitalized software, 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 (844) 602-0380 (domestic) or (862) 298-0970 (international). A live webcast will also be made available at www.altigen.com. To access the replay, dial (877) 481-4010 (domestic) or (919) 882-2331 (international), conference ID #57504. 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 mid-size to large enterprises. Our robust suite of applications integrate with Skype for Business, Microsoft Teams and Office 365 to deliver unparalleled capabilities to organizations using these Microsoft solutions. 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, CA. 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, many of which are outside the Company's control. 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.

ALTIGEN COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

(amounts in thousands, except per share data)

  Three Months Ended 
  December 31, 
  2019  2018 
Net revenue $2,844  $2,779 
Gross profit  2,208   2,303 
Operating expenses:        
Research and development  656   614 
Selling, general & administrative  1,058   1,079 
Operating income  494   610 
Other income/(expense), net  8   2 
Net income before provision for income taxes  502   612 
Income tax benefit (expense)  -   - 
Net income $502  $612 
         
Per share data:        
Basic $0.02  $0.03 
Diluted $0.02  $0.02 
Weighted average shares outstanding:        
Basic  22,921   22,842 
Diluted  25,913   24,918 
         


ALTIGEN COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(amounts in thousands)

   December 31, 2019    September 30, 2019 
Cash and cash equivalents  4,423    4,357 
Accounts receivable, net    543      371 
Other current assets    356      287 
Property and equipment, net    74      84 
Operating lease right-of-use (1)    1,063      - 
Intangible assets, net    429      395 
Capitalized software, net    1,345      1,154 
Deferred tax asset    8,453      8,453 
Other long-term assets    36      36 
Total assets  16,722    15,137 
                
Current liabilities (1)  1,912    1,678 
Long-term liabilities (1)    1,133      295 
Stockholders' equity    13,677      13,164 
Total liabilities and stockholders' equity  16,722    15,137 
         

(1) On October 1, 2019, the Company adopted the new leasing guidance (ASU 2016-2), which requires that a lessee recognize the assets and liabilities that arise from operating leases. The Company recognized a right-of-use asset and a liability relating to lease payments (the Lease Liability) in the statements of financial position for lease contracts having terms beyond 12 months period. The adoption of new leasing guidance resulted in recognition of $1.1 million of right-of-use asset and a total of $1.1 million of leasing liability as of December 31, 2019.

 

ALTIGEN COMMUNICATIONS, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(amounts in thousands, except per share data)

  Three Months Ended 
  December 31, 
  2019  2018 
Reconciliation of GAAP to Non-GAAP Gross Profit:      
GAAP gross profit $2,208  $2,303 
Amortization of capitalized software  42   21 
Acquisition related expenses  40   - 
Non-GAAP gross profit $2,290  $2,324 
         
Reconciliation of GAAP to Non-GAAP Expenses:        
GAAP operating expenses $1,714  $1,693 
Section 382 study (1)  -   68 
Depreciation and amortization  10   12 
Amortization of capitalized software  22   15 
Stock-based compensation  5   8 
Non-GAAP operating expenses $1,677  $1,590 
         
     
GAAP net income $502  $612 
Section 382 study (1)  -   68 
Depreciation and amortization  10   12 
Amortization of capitalized software  64   36 
Stock-based compensation  5   8 
Acquisition related expenses  40   - 
Non-GAAP net income $621  $736 
         
Per share data:        
Basic $0.03  $0.03 
Diluted $0.02  $0.03 
Weighted average shares outstanding:        
Basic  22,921   22,842 
Diluted  25,913   24,918 


(1) During the first quarter of fiscal 2019, the Company performed a section 382 ownership change analysis to determine if there were any limitations on the utilization of its NOLs.


CONTACT:

Carolyn David
Vice President of Finance
Altigen Communications, Inc.
Phone: 408-597-9033
www.altigen.com

SOURCE: Altigen Communications, Inc.



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