Dialogic Inc. Reports Third Quarter 2012 Financial Results

  Dialogic Inc. Reports Third Quarter 2012 Financial Results

Organizational, Operational and Financial initiatives driving positive impact

Business Wire

MILPITAS, Calif. -- November 13, 2012

Dialogic Inc. (NASDAQ: DLGC), a leading provider of products and technologies
that enable operators to provide an enhanced mobile experience, today
announced third quarter financial results for the period ending September 30,
2012.

On a GAAP basis, Dialogic achieved the following financial results for the
third quarter of 2012 as compared to the third quarter of 2011 and the second
quarter of 2012.

  *Total revenue for the third quarter of 2012 was $42.4 million, compared to
    $47.4 million in the third quarter of 2011 and $38.6 million in the second
    quarter of 2012.
  *Gross margin for the third quarter of 2012 was 61.8%, compared to 59.8% in
    the third quarter of 2011 and 45.9% in the second quarter of 2012.
  *Operating expense for the third quarter of 2012 was $26.4 million,
    compared to $37.3 million in the third quarter of 2011 and $35.5 million
    in the second quarter of 2012.
  *Net loss for the third quarter of 2012 was ($0.3) million, or ($0.03) per
    share, compared to losses of ($13.1) million, or ($2.09) per share, in the
    third quarter of 2011 and ($18.0) million, or ($2.85) per share, in the
    second quarter of 2012. Earnings per share results were calculated on a
    post-split basis, taking into effect the company’s 5 for 1 reverse stock
    split, effected on September 14, 2012, retroactively applied for compared
    periods.

As reflected below in the Reconciliation of Condensed Consolidated Statements
of Operations to Adjusted EBITDA Results, on a non-GAAP basis, Dialogic
achieved the following financial results for the third quarter of 2012, as
compared to the third quarter of 2011 and to the second quarter of 2012.

  *Total revenue for the third quarter of 2012 was $42.5 million, compared to
    $48.0 million in the third quarter of 2011 and $39.3 million in the second
    quarter of 2012.
  *Gross margin for the third quarter of 2012 was 65.3%, compared to 65.3% in
    the third quarter of 2011 and 65.1% in the second quarter of 2012.
  *Operating expense for the third quarter of 2012 was $23.9 million,
    compared to $30.3 million in the third quarter of 2011 and $27.5 million
    in the second quarter of 2012.
  *Adjusted EBITDA for the third quarter of 2012 was $3.8 million, compared
    to $1.0 million in the third quarter of 2011 and ($2.0) million in the
    second quarter of 2012.

“Dialogic is pleased to report that the organizational, operational and
financial initiatives that have been implemented over the past four quarters
are starting to yield better results across key dimensions of our business,”
said Kevin Cook, President and CEO. “We are encouraged that our Next-Gen
portfolio achieved double digit sequential revenue growth. In addition, we
recorded the lowest quarterly non-GAAP operating expenses and the highest
adjusted EBITDA for 2012.”

“Our customers continue to reinforce that we are uniquely enabling the
integration and delivery of complex video, voice and data services across
legacy and Next-Gen IMS/LTE networks,” added Cook. “Throughout the quarter, we
demonstrated success in turning up new Next-Gen networks with our
ControlSwitch system, enhancing existing networks with our BorderNet session
border controllers and expanding the capacity of severely constrained networks
with our Session Bandwidth Optimization portfolio. The company’s ability to
address the breadth of customer opportunities served us well.”

Conference Call Information

Dialogic will hold its third quarter earnings conference call at approximately
4:30 p.m. Eastern Standard Time on Tuesday, November 13, 2012. Dialogic will
offer a live webcast of the conference call on its website at
www.dialogic.com, which will also include forward-looking information. For
parties in the United States, call 1-800-860-2442 to access the conference
call. International parties can access the call at 412-858-4600. A replay of
the webcast will be accessible from the "Investor Relations" section of the
Dialogic website. A telephonic replay of the conference call will also be
available one hour after the call and will run for 30 days. To hear the
telephonic replay, parties in the United States should call 1-877-344-7529 and
enter passcode 10021152#. International parties should call +1-412-317-0088
and enter passcode 10021152#. In addition, Dialogic's press release will be
distributed via Business Wire and posted on the Dialogic website prior to the
conference call.

About Dialogic

Dialogic (NASDAQ: DLGC) is a leading provider of products and technologies
that enable operators to provide an enhanced mobile experience. Whether our
products are used in mobile value-added service solutions or to transform,
connect and optimize communications services, Dialogic understands that mobile
experience matters. Our technology touches over two billion mobile subscribers
a day and our network solutions carry more than 15 billion minutes of traffic
per month.

For more information on Dialogic and the communications solutions built on
Dialogic® technology, visit www.dialogic.com and www.dialogic.com/showcase.

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 our ability to continue to achieve operational, organizational and
financial savings through initiatives already in process or which may be put
in process, generate positive cash flow and support continued revenue growth,
the potential market for and market acceptance of our products, industry and
competitive market conditions, gross margin expansion, creating new revenue
opportunities, reducing operating expenses 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 Dialogic's business is
set forth in the "Risk Factors" section in our Quarterly Report on Form 10-Q
for the three months ended June 30, 2012, as filed with the SEC. These filings
are 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 is a registered trademark and BorderNet and ControlSwitch 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. (DLGC-IR)

GAAP Financial Tables


DIALOGIC INC.
Condensed Consolidated Statements of Operations (GAAP)
(in thousands, except per share data)
(unaudited)
                                                              
                  Three Months Ended September     Nine Months Ended
                  30,                               September 30,
                    2012          2011          2012       2011    
Revenue:
Products          $  32,140        $  36,604        $  92,249      $ 118,428
Services            10,251        10,817        29,808     29,644  
Total revenue       42,391        47,421        122,057    148,072 
                                                                   
Cost of
revenue:
Products             11,070           13,700           38,038        45,237
Services            5,118         5,358         15,267     16,215  
Total cost of       16,188        19,058        53,305     61,452  
revenue
Gross profit        26,203        28,363        68,752     86,620  
                                                                   
Operating
expenses:
Research and
development,         9,266            13,540           33,459        42,262
net
Sales and            9,261            12,664           31,935        41,829
marketing
General and          7,375            9,391            23,766        27,553
administrative
Restructuring       457           1,674         4,760      6,420   
charges
Total operating     26,359        37,269        93,920     118,064 
expenses
Loss from            (156    )        (8,906   )       (25,168 )     (31,444 )
operations
                                                                   
Other income
(expense):
Interest and
other income         242              (3       )       95            (3      )
(expense), net
Interest             (1,792  )        (4,695   )       (8,836  )     (13,227 )
expense
Change in fair
value of             1,750            -                2,154         -
warrants
Foreign
exchange loss,      (278    )      (51      )     (1,047  )   (384    )
net
Total other         (78     )      (4,749   )     (7,634  )   (13,614 )
expense, net
Loss before
provision            (234    )        (13,655  )       (32,802 )     (45,058 )
(benefit) for
income taxes
Income tax
provision           56            (557     )     304        588     
(benefit)
Net loss          $  (290    )    $  (13,098  )   $  (33,106 )  $ (45,646 )
                                                                   
Net loss per
share - basic     $  (0.03   )     $  (2.09    )    $  (4.34   )   $ (7.30   )
and diluted
Weighted
average shares
of common stock
used in             10,229        6,269         7,634      6,256   
calculation of
net loss per
share - basic
and diluted
                                                                             

                                                      
DIALOGIC INC.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
                                                             
                                        September 30, 2012  December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents               $   2,661            $   10,353
Restricted cash                             1,000                1,497
Accounts receivable, net of
allowance of $3,797 and $3,622,             39,393               47,460
respectively
Inventory                                   9,741                20,127
Other current assets                       7,845             9,157      
Total current assets                        60,640               88,594
Property and equipment, net                 6,479                7,947
Intangible assets, net                      26,675               33,267
Goodwill                                    31,223               31,223
Other assets                               1,680             2,311      
Total assets                            $   126,697        $   163,342    
                                                             
LIABILITIES AND STOCKHOLDERS'
DEFICIT
Current liabilities:
Accounts payable                        $   19,414           $   21,569
Accrued liabilities                         18,298               22,449
Deferred revenue, current portion           13,503               14,872
Bank indebtedness                           10,709               12,509
Income taxes payable                        920                  1,665
Interest payable, related parties          50                3,452      
Total current liabilities                   62,894               76,516
Long-term debt, related parties,            64,233               94,675
net of discount
Warrants                                    4,917                -
Other long-term liabilities                8,649             7,587      
Total liabilities                          140,693           178,778    
Commitments and contingencies
Preferred stock, $0.001 par value:
Authorized - 10,000,000 shares;             -                    -
Issued and outstanding - 1 share
Stockholders' deficit:
Common stock, $0.001 par value:
Authorized - 200,000,000 shares;
Issued and outstanding 14,401,747           14                   6
and 6,295,230 shares, respectively
Additional paid-in capital                  257,049              222,087
Accumulated other comprehensive             (22,630    )         (22,206    )
loss
Accumulated deficit                        (248,429   )       (215,323   )
Total stockholders' deficit                (13,996    )       (15,436    )
Total liabilities and stockholders'     $   126,697        $   163,342    
deficit
                                                                            

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 Adjusted EBITDA is useful to investors, because it reflects the
operating performance of Dialogic. Dialogic management uses these non-GAAP
measures as important indicators of the company'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 fund operating activities, 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 GAAP
financial measures to non-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, income taxes, depreciation
and amortization. "Adjusted EBITDA" is defined as EBITDA, plus adjustments for
nonrecurring items or other adjustments. Adjusted EBITDA includes EBITDA and
also restructuring and integration costs, product rationalization, non-cash
stock compensation expense, purchase accounting adjustments, SEC inquiry
expenses and other income (expense) items, which includes the change in the
fair value of warrants and foreign exchange gain (loss). Dialogic considers
Adjusted EBITDA as a key metric in evaluating its financial performance.

Non-GAAP Financial Tables

                                                                                                                            
DIALOGIC INC.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended September 30, 2012
(in thousands, except per share data)
(unaudited)
                                                                                                                                      
                               Depreciation                                     Stock-based    Purchase
                               and            Restructuring   Product           Compensation   Accounting    SEC        Other         Adjusted
                                              and
                 GAAP         Amortization  Integration    Rationalization  Expense       Adjustments  Inquiry   Adjustments  EBITDA
                                              Costs
Revenue:
Products         $ 32,140      -              -               -                 -              165           -          -             $ 32,305
Services           10,251      -              -               -                 -              (77      )    -          -               10,174
                                                                                                                                      
Cost of
revenue:
Products           11,070      (1,226   )     -               (516       )      (86      )     371           -          -               9,613
Services           5,118                      -               -                 -              -             -          -               5,118
                                                                                                                                      
Operating
expenses:
Research and
development,       9,266       (324     )     4               -                 (146     )     73            -          -               8,872
net
Sales and          9,261       (471     )     19              -                 (175     )     6             -          -               8,641
marketing
General and        7,375       (269     )     (486      )     -                 (238     )     69            (64    )   -               6,387
administrative
Restructuring      457         -              (457      )     -                 -              -             -          -               -
charges
                                                                                                                                      
Total other        (78     )   -              -               -                 -              -             -          78              -
expense, net
Income tax        56        -            -             -               -            -           -        (56      )    -       
provision
Net (loss)       $ (290    )  2,290        920           516             645          (431     )   64       134         $ 3,848   
income
                                                                                                                                      
Net (loss)
income per       $ (0.03   )                                                                                                          $ 0.38
share - basic
and diluted
Weighted
average shares
of common
stock used in
calculation of    10,229                                                                                                             10,229  
net (loss)
income per
share - basic
and diluted
                                                                                                                                      
DIALOGIC INC.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended September 30, 2011
(in thousands, except per share data)
(unaudited)
                                                                                                                                      
                               Depreciation                                     Stock-based    Purchase
                               and            Restructuring   Product           Compensation   Accounting    SEC        Other
                                              and
                 GAAP         Amortization  Integration    Rationalization  Expense       Adjustments  Inquiry   Adjustments  Non-GAAP
                                              Costs
Revenue:
Products         $ 36,604      -              -               -                 -              155           -          -             $ 36,759
Services           10,817      -              -               -                 -              413           -          -               11,230
                                                                                                                                      
Cost of
revenue:
Products           13,700      (2,146   )     -               -                 (89      )     (138     )    -          -               11,327
Services           5,358       -              (25       )     -                 -              -             -          -               5,333
                                                                                                                                      
Operating
expenses:
Research and
development,       13,540      (437     )     (65       )     -                 (239     )     -             -          -               12,799
net
Sales and          12,664      (1,269   )     (21       )     -                 (234     )     -             -          -               11,140
marketing
General and        9,391       (812     )     (286      )     -                 (198     )     -             (1,699 )   -               6,396
administrative
Restructuring      1,674       -              (1,674    )     -                 -              -             -          -               -
charges
                                                                                                                                      
Total other        (4,749  )   -              -               -                 -              -             -          4,749           -
expense, net
Income tax        (557    )  -            -             -               -            -           -        557          -       
benefit
Net (loss)       $ (13,098 )  4,664        2,071         -               760          706         1,699    4,192       $ 994     
income
                                                                                                                                      
Net (loss)
income per       $ (2.09   )                                                                                                          $ 0.16
share - basic
and diluted
Weighted
average shares
of common
stock used in
calculation of    6,269                                                                                                              6,269   
net (loss)
income per
share - basic
and diluted
                                                                                                                                      
DIALOGIC INC.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended June 30, 2012
(in thousands, except per share data)
(unaudited)
                                                                                                                                      
                               Depreciation                                     Stock-based    Purchase
                               and            Restructuring   Product           Compensation   Accounting    SEC        Other
                                              and
                 GAAP         Amortization  Integration    Rationalization  Expense       Adjustments  Inquiry   Adjustments  Non-GAAP
                                              Costs
Revenue:
Products         $ 28,599      -              -               -                 -              100           -          -             $ 28,699
Services           9,960       -              -               -                 -              596           -          -               10,556
                                                                                                                                      
Cost of
revenue:
Products           15,901      (2,052   )     -               (4,821     )      (74      )     (215     )    -          -               8,739
Services           4,978       -              -               -                 -              -             -          -               4,978
                                                                                                                                      
Operating
expenses:
Research and
development,       11,370      (430     )     -               -                 (120     )     -             -          -               10,820
net
Sales and          11,063      (833     )     -               -                 (154     )     -             -          -               10,076
marketing
General and        8,806       (289     )     (1,264    )     -                 (217     )     -             (416   )   -               6,620
administrative
Restructuring      4,246       -              (4,246    )     -                 -              -             -          -               -
charges
                                                                                                                                      
Total other        (338    )   -              -               -                 -              -             -          338             -
expense, net
Income tax        (112    )  -            -             -               -            -           -        112          -       
benefit
Net (loss)       $ (18,031 )  3,604        5,510         4,821           565          911         416      226         $ (1,978  )
income
                                                                                                                                      
Net (loss)
income per       $ (2.85   )                                                                                                          $ (0.31   )
share - basic
and diluted
Weighted
average shares
of common
stock used in
calculation of    6,337                                                                                                              6,337   
net (loss)
income per
share - basic
and diluted
                                                                                                                                      
DIALOGIC INC.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Nine Months Ended September 30, 2012
(in thousands, except per share data)
(unaudited)
                                                                                                                                      
                               Depreciation                                     Stock-based    Purchase                               
                               and            Restructuring   Product           Compensation   Accounting    SEC        Other
                                              and
                 GAAP         Amortization  Integration    Rationalization  Expense       Adjustments  Inquiry   Adjustments  Non-GAAP
                                              Costs
Revenue:
Products         $ 92,249      -              -               -                 -              434           -          -             $ 92,683
Services           29,808      -              -               -                 -              827           -          -               30,635
                                                                                                                                      
Cost of
revenue:
Products           38,038      (4,844   )     -               (5,337     )      (149     )     156           -          -               27,864
Services           15,267      -              -               -                 (95      )     -             -          -               15,172
                                                                                                                                      
Operating
expenses:
Research and
development,       33,459      (1,106   )     4               -                 (506     )     73            -          -               31,923
net
Sales and          31,935      (2,119   )     19              -                 (551     )     6             -          -               29,291
marketing
General and        23,766      (1,136   )     (2,197    )     -                 (595     )     69            (243   )   -               19,663
administrative
Restructuring      4,760       -              (4,760    )     -                 -              -             -          -               -
charges
                                                                                                                                      
Total other        (7,634  )   -              -               -                 -              -             -          7,634           -
expense, net
Income tax        304       -            -             -               -            -           -        (304     )    -       
provision
Net (loss)       $ (33,106 )  9,205        6,934         5,337           1,896        957         243      7,938       $ (595    )
income
                                                                                                                                      
Net (loss)
income per       $ (4.34   )                                                                                                          $ (0.08   )
share - basic
and diluted
Weighted
average shares
of common
stock used in
calculation of    7,634                                                                                                              7,634   
net (loss)
income per
share - basic
and diluted
                                                                                                                                      
DIALOGIC INC.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Nine Months Ended September 30, 2011
(in thousands, except per share data)
(unaudited)
                                                                                                                                      
                               Depreciation                                     Stock-based    Purchase
                               and            Restructuring   Product           Compensation   Accounting    SEC        Other
                                              and
                 GAAP         Amortization  Integration    Rationalization  Expense       Adjustments  Inquiry   Adjustments  Non-GAAP
                                              Costs
Revenue:
Products         $ 118,428     -              -               -                 -              2,664         -          -             $ 121,092
Services           29,644      -              -               -                 -              1,801         -          -               31,445
                                                                                                                                      
Cost of
revenue:
Products           45,237      (6,472   )     -               -                 (182     )     1,128         -          -               39,711
Services           16,215      -              (25       )     -                 (63      )     -             -          -               16,127
                                                                                                                                      
Operating
expenses:
Research and
development,       42,262      (1,298   )     (65       )     -                 (565     )     -             -          -               40,334
net
Sales and          41,829      (3,888   )     (21       )     -                 (775     )     (389     )    -          -               36,756
marketing
General and        27,553      (2,404   )     (286      )     -                 (743     )     -             (2,526 )   -               21,594
administrative
Restructuring      6,420       -              (6,420    )     -                 -              -             -          -               -
charges
                                                                                                                                      
Total other        (13,614 )   -              -               -                 -              -             -          13,614          -
expense, net
Income tax        588       -            -             -               -            -           -        (588     )    -       
provision
Net (loss)       $ (45,646 )  14,062       6,817         -               2,328        3,726       2,526    14,202      $ (1,985  )
income
                                                                                                                                      
Net (loss)
income per       $ (7.30   )                                                                                                          $ (0.32   )
share - basic
and diluted
Weighted
average shares
of common
stock used in
calculation of    6,256                                                                                                              6,256   
net (loss)
income per
share - basic
and diluted

Contact:

Investor Relations:
Dialogic Inc.
Andrew Goldberg, 973-967-6425
Senior Vice President, Marketing & Strategy
Andrew.Goldberg@dialogic.com
 
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