Dialogic Inc. Reports Fourth Quarter and Full Year 2012 Financial Results

  Dialogic Inc. Reports Fourth Quarter and Full Year 2012 Financial Results

              Company elevates from Transition to Transformation

Business Wire

MILPITAS, Calif. -- March 21, 2013

Dialogic Inc. (Nasdaq:DLGC), the Network Fuel™ company, today announced fourth
quarter and full year financial results for the period ending December 31,
2012.

Fourth Quarter 2012 Highlights

  *Total revenue was $37.9 million
  *Gross Margin was 60.6%
  *Net Loss was $4.7 million or $0.32 per share
  *Cash on hand was $6.5 million

Full Year 2012 Highlights

  *Total revenue was $160.0 million
  *Gross Margin was 57.3%
  *Net Loss was $37.8 million or $4.04 per share

GAAP Results

Revenue for the fourth quarter of 2012 was $37.9 million compared to $42.4
million in the third quarter of 2012 and $50.0 million in the fourth quarter
of 2011. Gross Margin for the fourth quarter of 2012 was 60.6% compared to
61.8% in the third quarter of 2012 and 58.1% in the fourth quarter of 2011.
Operating Expense for the fourth quarter of 2012 was $28.5 million compared to
$26.4 million in the third quarter of 2012 and $33.9 million in the fourth
quarter of 2011. Net Loss for the fourth quarter of 2012 was $4.7 million, or
$0.32 per share compared to $0.3 million, or $0.03 per share, in the third
quarter of 2012 and $9.2 million, or $1.46 per share, in the fourth quarter of
2011. Cash on hand for the fourth quarter of 2012 was $6.5 million compared to
$2.7 million in the third quarter of 2012 and $10.4 million in the fourth
quarter of 2011.

Revenue for full year 2012 was $160.0 million compared to $198.1 million in
2011. Gross Margin for 2012 was 57.3% compared to 58.4% in 2011. Operating
Expense for 2012 was $122.5 million compared to $152.0 million in 2011. Net
Loss for 2012 was $37.8 million, or $4.04 per share, compared to a net loss of
$54.8 million in 2011, or $8.75 per share.

Non-GAAP Results

Total Revenue for the fourth quarter of 2012 was $39.1 million compared to
$42.5 million in the third quarter of 2012 and $50.4 million in the fourth
quarter of 2011. Gross Margin for the fourth quarter of 2012 was 64.5%
compared to 65.3% in the third quarter of 2012 and 65.8% in the fourth quarter
of 2011. Operating Expense for the fourth quarter of 2012 was $23.8 million
compared to $23.9 million in the third quarter of 2012 and $28.8 million in
the fourth quarter of 2011. Adjusted EBITDA for the fourth quarter of 2012 was
$1.4 million compared to $3.8 million in the third quarter of 2012 and $4.4
million in the fourth quarter of 2011.

Total Revenue for 2012 was $162.4 million compared to $203.0 million in 2011.
Gross Margin for 2012 was 65.0% compared to 64.0% in 2011. Operating Expense
for 2012 was $104.7 million compared to $127.5 million in 2011. Adjusted
EBITDA for 2012 was $0.8 million compared to $2.4 million in 2011.

Restructuring:

In December 2012, the company initiated a plan to further streamline
operations and reduce operating costs, including specific workforce
reductions. In the fourth quarter of 2012, the company recorded $2.3 million
for severance and related charges for workforce reductions that were
implemented in the first quarter of 2013. In total, the Company recorded $5.8
million for severance and related charges for the full year 2012.

Quote

"Throughout 2012 we focused on transitional activities including operational,
organizational, and financial initiatives that significantly improved the
health of the company," said Kevin Cook, President and CEO. "We successfully
realigned our product organization to focus on our most promising solutions,
evolved the talent on our senior management team and Board of Directors,
eliminated $22.8 million in operating expenses year over year and restructured
our long-term debt."

"Dialogic is now in a transformational phase and we have positioned the
company favorably for 2013 and beyond. Core to our strategy is Network Fuel™,
a go-to-market approach that elevates the performance of service provider
networks and application platforms and enables these customers to offer a
dynamic subscriber experience including video, voice, data — and whatever's
next," added Cook.

Conference Call Details:

Date: March 21, 2013
Time: 4:30pm EDT
Dial-in number: 800.860.2442
International callers: 412.858.4600
Live Webcast: investor.dialogic.com

Replay Information:

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 be available one hour after the call and will run for 30 days. Parties in
the United States should call 1-877-344-7529 and enter passcode 10026340#.
International parties should call +1-412-317-0088 and enter passcode
10026340#.

About Dialogic:

Dialogic (Nasdaq:DLGC), the Network Fuel™ company, inspires the world’s
leading service providers and application developers to elevate the
performance of media-rich communications across the most advanced networks. We
boost the reliability of any-to-any network connections, supercharge the
impact of applications and amplify the capacity of congested networks.
Forty-eight of the world’s top 50 mobile operators and nearly 3,000
application developers rely on Dialogic to redefine the possible and exceed
user expectations.

For more information on Dialogic and the communications solutions energized by
our technology, visit www.dialogic.com and www.dialogic.com/en/showcase. Also,
visit our social media newsroom for the latest news, videos and blog posts.

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 period ended September 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 Network Fuel is a trademark of Dialogic
Inc. or a subsidiary. (DLGC-IR)

GAAP Financial Tables

                                                            
Dialogic Inc.
Consolidated Statements of Operations (GAAP)
(In thousands, except per share data)
                                                                   
                      Three Months Ended December   Twelve Months Ended
                      31,                            December 31,
                        2012          2011      2012       2011    
Revenue:
Products              $  28,980        $  38,660     $ 121,229     $ 157,088
Services                8,932         11,352    38,740     40,996  
Total revenue           37,912        50,012    159,969    198,084 
                                                                   
Cost of
revenue:
Products                 10,483           15,753       48,521        60,990
Services                4,445         5,207     19,712     21,422  
Total cost of           14,928        20,960    68,233     82,412  
revenue
Gross profit            22,984        29,052    91,736     115,672 
                                                                   
Operating
expenses:
Research and
development,             9,326            12,300       42,785        54,562
net
Sales and                9,521            12,464       41,456        54,293
marketing
General and              7,414            8,369        31,180        35,921
administrative
Restructuring           2,270         793       7,030      7,214   
charges
Total operating         28,531        33,926    122,451    151,990 
expenses
Loss from                (5,547  )        (4,874 )     (30,715 )     (36,318 )
operations
                                                                   
Other income
(expense):
Interest and
other income             85               76           180           73
(expense), net
Interest                 (1,894  )        (4,789 )     (10,730 )     (18,016 )
expense
Change in fair
value of                 2,932            -            5,086         -
warrants
Foreign
exchange loss,          (331    )      118       (1,378  )   (266    )
net
Total other
income                  792           (4,595 )   (6,842  )   (18,209 )
(expense), net
Loss before
provision                (4,755  )        (9,469 )     (37,557 )     (54,527 )
(benefit) for
income taxes
Income tax
(benefit)               (91     )      (306   )   213        282     
provision
Net loss              $  (4,664  )    $  (9,163 )  $ (37,770 )  $ (54,809 )
                                                                   
Net loss per
share - basic         $  (0.32   )     $  (1.46  )   $ (4.04   )   $ (8.75   )
and diluted
Weighted
average shares
of common stock
used in
calculation of
net loss per            14,409        6,289     9,341      6,265   
share - basic
and diluted
                                                                             

                                                             
Dialogic Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)

                                                   December 31,
                                                    2012        2011     
ASSETS
Current assets:
Cash and cash equivalents                          $ 6,501        $ 10,353
Restricted cash                                      900            1,497
Accounts receivable, net of allowance of             34,248         47,460
$1,217 and $3,622, respectively
Inventory                                            8,306          20,127
Prepaid expenses                                     4,639          3,580
Other current assets                                4,354       5,577    
Total current assets                                 58,948         88,594
Property and equipment, net                          5,978          7,947
Intangible assets, net                               25,089         33,267
Goodwill                                             31,223         31,223
Other assets                                        2,147       2,311    
Total assets                                       $ 123,385    $ 163,342  
                                                                  
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable                                   $ 16,994       $ 21,569
Accrued liabilities                                  21,270         22,449
Deferred revenue, current portion                    12,742         14,872
Bank indebtedness                                    11,717         12,509
Income taxes payable                                 1,007          1,665
Interest payable, related parties                   -           3,452    
Total current liabilities                            63,730         76,516
Long-term debt, related parties, net of              66,536         94,675
discount
Warrants                                             1,985          -
Other long-term liabilities                         8,978       7,587    
Total liabilities                                   141,229     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 14,415,652 and 6,295,230 shares,         14             6
respectively
Additional paid-in capital                           257,658        222,087
Accumulated other comprehensive loss                 (22,423  )     (22,206  )
Accumulated deficit                                 (253,093 )   (215,323 )
Total stockholders' deficit                         (17,844  )   (15,436  )
Total liabilities and stockholders' deficit        $ 123,385    $ 163,342  
                                                                  

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 December 31, 2012
(in thousands, except per share data)
(unaudited)
                                                                                                                                          
                                   Depreciation   Restructuring                     Stock-based    Purchase
                     GAAP         and           and            Product          Compensation  Accounting   SEC       Other        Adjusted
                                   Amortization   Integration     Rationalization   Expense        Adjustments   Inquiry    Adjustments   EBITDA
                                                  Costs
Revenue:
Products             $ 28,980      -              -               -                 -              73            -          737           $ 29,790
Services               8,932       -              -               -                 -              149           -          200             9,281
                                                                                                                                          
Cost of
revenue:
Products               10,483      (1,016   )     -               -                 (61      )     -             -          -               9,406
Services               4,445       -              -               -                 -              -             -          -               4,445
                                                                                                                                          
Operating
expenses:
Research and
development,           9,326       (303     )     -               -                 (130     )     -             -          -               8,893
net
Sales and              9,521       (620     )     -               -                 (157     )     -             -          -               8,744
marketing
General and            7,414       (358     )     (352      )     -                 (245     )     (60     )     (232   )   -               6,167
administrative
Restructuring          2,270       -              (2,270    )     -                 -              -             -          -               -
charges
                                                                                                                                          
Total other
income                 792         -              -               -                 -              -             -          (792     )      -
(expense), net
Income tax            (91     )  -            -             -               -            -           -        91           -
benefit
Net (loss)           $ (4,664  )  2,297        2,622         -               593          282         232      54          $ 1,416
income
                                                                                                                                          
Net (loss)
income per           $ (0.32   )                                                                                                          $ 0.10
share - basic
and diluted
Weighted
average shares
of common
stock used in
calculation of
net (loss)
income per            14,409                                                                                                             14,409
share - basic
and diluted
                                                                                                                                          
                                                                                                                                          
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended December 31, 2011
(in thousands, except per share data)
(unaudited)
                                                                                                                                          
                                   Depreciation   Restructuring                     Stock-based    Purchase
                     GAAP         and           and            Product          Compensation  Accounting   SEC       Other        Non-GAAP
                                   Amortization   Integration     Rationalization   Expense        Adjustments   Inquiry    Adjustments
                                                  Costs
Revenue:
Products             $ 38,660      -              -               -                 -              144           -          -             $ 38,804
Services               11,352      -              -               -                 -              281           -          -               11,633
                                                                                                                                          
Cost of
revenue:
Products               15,753      (2,096   )     -               -                 (79      )     (18     )     -          (1,500   )      12,060
Services               5,207       -              -               -                 -              -             -          -               5,207
                                                                                                                                          
Operating
expenses:
Research and
development,           12,300      (376     )     -               -                 (199     )     -             -          -               11,725
net
Sales and              12,464      (1,270   )     -               -                 (196     )     -             -          -               10,998
marketing
General and            8,369       (776     )     (175      )     -                 (225     )     -             (1,147 )   -               6,046
administrative
Restructuring          793         -              (793      )     -                 -              -             -          -               -
charges
                                                                                                                                          
Total other            (4,595  )   -              -               -                 -              -             -          4,595           -
expense, net
Income tax            (306    )  -            -             -               -            -           -        306          -
benefit
Net (loss)           $ (9,163  )  4,518        968           -               699          443         1,147    5,789       $ 4,401
income
                                                                                                                                          
Net (loss)
income per           $ (1.46   )                                                                                                          $ 0.70
share - basic
and diluted
Weighted
average shares
of common
stock used in
calculation of
net (loss)
income per            6,289                                                                                                              6,289
share - basic
and diluted
                                                                                                                                          
                                                                                                                                          
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   Restructuring                     Stock-based    Purchase
                     GAAP         and           and            Product          Compensation  Accounting   SEC       Other        Non-GAAP
                                   Amortization   Integration     Rationalization   Expense        Adjustments   Inquiry    Adjustments
                                                  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
net (loss)
income per            10,229                                                                                                             10,229
share - basic
and diluted
                                                                                                                                          
                                                                                                                                          
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Twelve Months Ended December 31, 2012
(in thousands, except per share data)
(unaudited)
                                                                                                                                          
                                   Depreciation   Restructuring                     Stock-based    Purchase
                     GAAP         and           and            Product          Compensation  Accounting   SEC       Other        Non-GAAP
                                   Amortization   Integration     Rationalization   Expense        Adjustments   Inquiry    Adjustments
                                                  Costs
Revenue:
Products             $ 121,229     -              -               -                 -              507           -          737           $ 122,473
Services               38,740      -              -               -                 -              976           -          200             39,916
                                                                                                                                          
Cost of
revenue:
Products               48,521      (5,860   )     -               (5,337     )      (210     )     156           -          -               37,270
Services               19,712      -              -               -                 (95      )     -             -          -               19,617
                                                                                                                                          
Operating
expenses:
Research and
development,           42,785      (1,409   )     4               -                 (636     )     73            -          -               40,816
net
Sales and              41,456      (2,739   )     19              -                 (708     )     6             -          -               38,035
marketing
General and            31,180      (1,494   )     (2,550    )     -                 (840     )     9             (475   )   -               25,830
administrative
Restructuring          7,030       -              (7,030    )     -                 -              -             -          -               -
charges
                                                                                                                                          
Total other            (6,842  )   -              -               -                 -              -             -          6,842           -
expense, net
Income tax            213       -            -             -               -            -           -        (213     )    -
provision
Net (loss)           $ (37,770 )  11,502       9,557         5,337           2,489        1,239       475      7,992       $ 821
income
                                                                                                                                          
Net (loss)
income per           $ (4.04   )                                                                                                          $ 0.09
share - basic
and diluted
Weighted
average shares
of common
stock used in
calculation of
net (loss)
income per            9,341                                                                                                              9,341
share - basic
and diluted
                                                                                                                                          
                                                                                                                                          
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Twelve Months Ended December 31, 2011
(in thousands, except per share data)
(unaudited)
                                                                                                                                          
                                   Depreciation   Restructuring                     Stock-based    Purchase
                     GAAP         and           and            Product          Compensation  Accounting   SEC       Other        Non-GAAP
                                   Amortization   Integration     Rationalization   Expense        Adjustments   Inquiry    Adjustments
                                                  Costs
Revenue:
Products             $ 157,088     -              -               -                 -              2,808         -          -             $ 159,896
Services               40,996      -              -               -                 -              2,082         -          -               43,078
                                                                                                                                          
Cost of
revenue:
Products               60,990      (8,568   )     -               -                 (261     )     1,110         -          (1,500   )      51,771
Services               21,422      -              (25       )     -                 (63      )     -             -          -               21,334
                                                                                                                                          
Operating
expenses:
Research and
development,           54,562      (1,674   )     (65       )     -                 (764     )     -             -          -               52,059
net
Sales and              54,293      (5,158   )     (21       )     -                 (971     )     (389    )     -          -               47,754
marketing
General and            35,921      (3,180   )     (461      )     -                 (968     )     -             (3,673 )   -               27,639
administrative
Restructuring          7,214       -              (7,214    )     -                 -              -             -          -               -
charges
                                                                                                                                          
Total other            (18,209 )   -              -               -                 -              -             -          18,209          -
expense, net
Income tax            282       -            -             -               -            -           -        (282     )    -
provision
Net (loss)           $ (54,809 )  18,580       7,786         -               3,027        4,169       3,673    19,991      $ 2,417
income
                                                                                                                                          
Net (loss)
income per           $ (8.75   )                                                                                                          $ 0.39
share - basic
and diluted
Weighted
average shares
of common
stock used in
calculation of
net (loss)
income per            6,265                                                                                                              6,265
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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