Altigen Communications, Inc. Reports Fiscal 2020 Second Quarter and First Six Months Financial Results

MILPITAS, CA / ACCESSWIRE / April 23, 2020 / Altigen Communications, Inc. (OTCQB:ATGN), a Silicon Valley based Microsoft ISV and Cloud Solutions provider, announced today its financial results for the second quarter ended March 31, 2020.

Second Quarter Financial Highlights

  • Revenue of $2.9 million, up 15% Year-Over-Year
  • Net Income was $497,000 GAAP, $630,000 Non-GAAP

Six Months Financial Highlights

  • Revenue of $5.8 million, up 9% Year-Over-Year
  • Net Income was $999,000 GAAP, $1.3 Million Non-GAAP

Second Quarter Fiscal 2020 Results

Net Revenue: Total revenue for the second quarter of fiscal 2020 was $2.9 million, compared to $2.8 million in the preceding quarter, and compared to $2.5 million in the prior year quarter. Second quarter revenue consisted of:

  • Cloud services revenue of $1.8 million, representing an increase of 8% and 20%, respectively, compared to the preceding quarter and the prior year period.
  • Software assurance revenue of $663,000, representing a decrease of 8% compared to the preceding quarter and a decrease of 6% year-over-year.
  • Software license revenue of $250,000, representing an increase of 22% and 15%, respectively, compared to the previous quarter and the prior year period.
  • Professional services and other revenue of $175,000, representing a decrease of 18% compared to the preceding quarter and an increase of 122% year-over-year.

Gross Margin: Gross margin in the second quarter of fiscal 2020 was 75.9%, compared to 77.6% in the preceding quarter, and compared to 81.7% 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 second quarter of fiscal 2020, GAAP net income was $497,000, or $0.02 per diluted share, compared with GAAP net income of $502,000, or $0.02 per diluted share in the preceding quarter, and compared with GAAP net income of $403,000, or $0.02 per diluted share in the same period in 2019, representing a slight decrease of 1% and an increase of 23%, respectively.

Non-GAAP Net Income: Non-GAAP net income for the second quarter of fiscal 2020 was $630,000, or $0.02 per diluted share, compared with non-GAAP net income of $621,000, or $0.02 per diluted share in the preceding quarter, and compared with non-GAAP net income of $430,000, or $0.02 per diluted share in the same period a year ago, representing an increase of 2% and 47%, respectively.

GAAP Operating Expenses: GAAP operating expenses totaled $1.7 million for the second quarter of fiscal 2020, the same for the preceding quarter and the prior year quarters.

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

First Six Months Fiscal 2020 Results

Net Revenue: For the first six months of fiscal 2020, total revenue grew 9% to $5.8 million, compared to $5.3 million for the first six months of fiscal 2019. In the first six months of fiscal 2020, cloud services revenue increased 18% to $3.5 million, software assurance revenue decreased 6% to $1.4 million, software license revenue decreased 32% to $453,000 and professional services and other revenue increased 132% to $390,000 million.

Gross Margin: Gross margin was 76.8% for the first six months of fiscal 2020, compared to 82.3% in the same period in 2019. The decrease in gross margin 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: GAAP net income for the first six months ended March 31, 2020 was $999,000, or $0.04 per diluted share, compared with GAAP net income of $1.0 million, or $0.04 per diluted share in the prior year period.

Non-GAAP Net Income: Non-GAAP net income for the first six months of fiscal year 2020 was $1.3 million, or $0.05 per diluted share, compared with non-GAAP net income of $1.2 million, or $0.05 per diluted share during the same period a year ago.

GAAP Operating Expenses: GAAP operating expenses totaled $3.4 million for the six months of fiscal 2020 and 2019.

Non-GAAP Operating Expenses: For the six months of fiscal 2020 and 2019, Non-GAAP operating expenses totaled $3.4 and $3.2 million, respectively.

Balance Sheet: Cash and cash equivalents totaled $4.9 million at March 31, 2020. Working capital was $3.7 million at the end of the second quarter of fiscal 2020, compared with $3.4 million at the end of the preceding quarter.

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 March 31, 2020. There was no impact on the Company’s consolidated statements of operations or cash flows.

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 #34332. 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.

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)

             
 
  Three Months Ended     Six Months Ended  
 
  March 31,     March 31,  
 
  2020     2019     2020     2019  
Net revenue
  2,933     2,540     5,777     5,319  
Gross profit
    2,228       2,076       4,436       4,379  
Operating expenses:
                               
Research and development
    662       646       1,318       1,260  
Selling, general & administrative
    1,073       1,005       2,131       2,085  
Litigation
          12             12  
Operating income
    493       413       987       1,022  
Other income/(expense), net
    7       6       15       9  
Net income before provision for income taxes
    500       419       1,002       1,031  
Income tax benefit (expense)
    (3 )     (16 )     (3 )     (16 )
Net income
  497     403     999     1,015  
 
                               
Per share data:
                               
Basic
  0.02     0.02     0.04     0.04  
                                 
Diluted
  0.02     0.02     0.04     0.04  
Weighted average shares outstanding:
                               
Basic
    22,948       22,866       22,933       22,854  
Diluted
    26,030       25,650       25,970       25,364  
                                 

ALTIGEN COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)
(amounts in thousands)

             
 
  March 31,
2020
    September 30,
2019
 
Cash and cash equivalents
  4,860     4,357  
Accounts receivable, net
    552       371  
Other current assets
    365       287  
Property and equipment, net
    64       84  
Operating lease right-of-use (1)
    1,001        
Intangible assets, net
    389       395  
Capitalized software, net
    1,511       1,154  
Deferred tax asset
    8,453       8,453  
Other long-term assets
    25       36  
Total assets
  17,220     15,137  
 
               
Current liabilities (1)
  2,044     1,678  
Long-term liabilities (1)
    998       295  
Stockholders’ equity
    14,178       13,164  
Total liabilities and stockholders’ equity
  17,220     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 approximately $1.1 million of right-of-use asset and a total of $1.1 million of leasing liability in the first quarter of fiscal year 2020.

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

(amounts in thousands, except per share data)

             
 
  Three Months Ended
March 31,
    Six Months Ended
March 31,
 
 
  2020     2019     2020     2019  
Reconciliation of GAAP to Non-GAAP Gross Profit:
                       
GAAP gross profit
  2,933     2,540     5,777     5,319  
Amortization of capitalized software
    53       (10 )     95       11  
Acquisition related expenses
    40             80        
Non-GAAP gross profit
  3,026     2,530     5,952     5,330  
 
                               
Reconciliation of GAAP to Non-GAAP Expenses:
                               
GAAP operating expenses
  1,735     1,663     3,449     3,357  
Litigation
          12             12  
Section 382 study (1)
                      68  
Depreciation and amortization
    10       12       20       24  
Amortization of capitalized software
    25       8       47       23  
Stock-based compensation
    2       5       7.4       13  
Non-GAAP operating expenses
  1,698     1,626     3,375     3,217  
 
                               
Reconciliation of GAAP to Non-GAAP Net Income:
                               
GAAP net income
  497     403     999     1,015  
Litigation
          12             12  
Section 382 study (1)
                      68  
Depreciation and amortization
    10       12       20       24  
Amortization of capitalized software
    78       (2 )     142       34  
Stock-based compensation
    2       5       7       13  
Acquisition related expenses
    40             80        
Deferred tax asset valuation allowance 
    3             3        
Non-GAAP net income
  630     430     1,251     1,166  
 
                               
Per share data:
                               
Basic
  0.03     0.02     0.05     0.05  
Diluted
  0.02     0.02     0.05     0.05  
Weighted average shares outstanding:
                               
Basic
    22,948       22,866       22,933       22,854  
Diluted
    26,030       25,650       25,970       25,364  
                                 

 

(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.

SOURCE: Altigen Communications, Inc.

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