Radisys Reports Second Quarter Results and Completion of Its Strategic Assessment

  Radisys Reports Second Quarter Results and Completion of Its Strategic
  Assessment

  *Revenue of $65.4 million; ATCA and Software-Solutions of $44.3 million
    accounted for 68% of total revenue.
  *The Company was awarded four new and incremental Media Resource Function
    (MRF) design wins with multiple carriers across multiple geographies.
  *Trillium license and professional service pipeline increased by over 40%
    entering Q3 2013 when compared to the beginning of 2013.
  *Second quarter platform design wins expected to result in approximately
    $70 million of revenue over the next five years.
  *Announces the completion of its strategic assessment.
  *Cash flow of $2.2 million increases cash balance to $33.9 million.

Business Wire

HILLSBORO, Ore. -- July 30, 2013

Radisys Corporation (NASDAQ:RSYS), a market leader enabling wireless
infrastructure solutions for telecom, aerospace, and defense applications,
announced second quarter 2013 revenues of $65.4 million and a GAAP net loss of
$4.1 million or $0.14 per diluted share. Second quarter non-GAAP net income
was $0.8 million or $0.03 per diluted share. Second quarter non-GAAP results
exclude the amortization of acquired intangible assets, stock-based
compensation, restructuring and acquisition-related charges, and non-cash tax
expense. A reconciliation of GAAP to non-GAAP results is located in the tables
included at the end of this press release.

Commenting on the second quarter results, Brian Bronson, Radisys' President
and Chief Executive Officer, stated, “Radisys met or exceeded virtually all of
our second quarter strategic, operational, and financial objectives. Our
strategy to leverage our MRF in applications such as VoLTE, audio and video
transcoding and in providing Rich Communications Services (RCS) is continuing
to gain momentum with four new second quarter MRF design wins. Coupled with a
40% increase in our Trillium license and professional service opportunities
compared to six months ago, our Software-Solutions revenue is positioned for
strong growth in the second half of 2013. We also had another solid design win
quarter for our Platforms products, generated a non-GAAP profit with positive
cash flow and have put plans in place to make all product lines profitable in
the future.”

Other Second Quarter Financial Highlights

  *Total GAAP Research and Development (R&D) and Selling, General and
    Administrative (SG&A) expenses were $21.5 million and non-GAAP R&D and
    SG&A expenses were $20.6 million; representing a $1.0 million sequential
    reduction when compared to the first quarter of 2013 as the result of a
    $1.3 million gain associated with a license infringement settlement.
  *Cash and cash equivalents were $33.9 million at the end of the second
    quarter; a $2.2 million sequential increase from the first quarter. On
    July 29, 2013 the Company entered into an amended agreement with Silicon
    Valley Bank which extends the existing $40 million line of credit through
    July 2016. The amended line of credit allows the exclusion of $12 million
    in cash restructuring charges from the EBITDA covenant calculation and is
    designed to provide adequate access to capital as the Company completes
    planned restructuring activities and convertible debt repayment in
    February 2015.

Completion of Strategic Assessment

Mr. Bronson went on to comment about the completion of the Company's strategic
assessment, “When my team and I took over the business back in the fall almost
a year ago, I indicated we would conduct a thorough and relatively quick
evaluation of the company's strategic direction. We concluded that we needed
to do fewer things and do them very well. We needed to increase our focus and
investment in our MRF product line and leverage our Trillium and software
expertise into differentiated solutions, while at the same time canceling or
selling non-core products lines. We also realized the organization and site
structure was too complex resulting in too high a cost structure. We have
delivered on the objectives set forth last year by:

  *Bringing cash back on the balance sheet through positive cash flow,
    excluding restructuring activities
  *Prioritizing our best market opportunities based on our strengths, overall
    technology, market position, and customer relationships
  *Testing the merits of potentially monetizing or managing for cash certain
    non-strategic product lines to drive overall company focus and bring cash
    onto the balance sheet. The actions completed or planned as of the
    earnings release date are:

       *OS-9 software divestiture;
       *Security gateway product cancellation;
       *Manage for cash our low end Com Express product line; and
       *Dramatically improve the profitability of Radisys through substantial
         cost reduction and quality improvement.

Our overall plan is to reduce annual gross expenses by approximately $20
million over the next 18 months, resulting in 2014 operating expense of
approximately $80 million with an additional $6 million reduction to be
realized as we exit 2014. We have and will continue to reduce the cost and
complexity of our organization structure.

Our top three strategic priorities are:

  *At least double our MRF revenue in the next three years

We have a strong foundation in audio conferencing and are successfully
leveraging our knowledge base to attack a broader market with our new carrier
grade MPX-12000 and recently launched virtualized MPX-OS software. We are now
in 14 trials supporting transcoding, Voice over LTE and Rich Communication
Service applications with several expected to move to deployment as we enter
2014. We also are increasing our investments in this area to ensure we capture
the market's momentum.

Given our solid incumbent position in audio conferencing, the demonstrated
profitability profile, and our technology and product leadership in markets
with accelerating growth, MRF alone has the opportunity to create meaningful
Radisys shareholder value.

  *Grow our Trillium software and solutions revenue 20% per year

The 40% increase in our pipeline of new license and professional service
opportunities has been enabled by focusing and leveraging our domain expertise
in LTE software, especially small cells, and extending it into other adjacent
markets and applications that leverage similar small cell technology.

Our goal is to become embedded and deeply intertwined in as many carrier radio
access networks as possible while also providing differentiated telecom
solutions to reduce network cost and complexity, thereby enhancing the value
of Trillium software and solutions to our company.

  *Make our Platforms products profitable and focus investment on enabling a
    virtualized platform to capitalize on the market's transition to SDN or
    software defined networks and NFV or network function virtualization.

We have initiated plans to reduce annual gross expenses by approximately $20
million over the next 18 months, resulting in 2014 expense of approximately
$80 million with an additional $6 million reduction to be realized as we exit
2014. In addition to returning the company to profitability, these reductions
will enable us to make the desired MRF investments mentioned earlier.”

Third Quarter 2013 Outlook

  *Revenue is expected to be between $55.0 million and $60.0 million
    resulting primarily from long expected decreases in our COMe/RMS and Other
    Legacy telecommunications revenue. ATCA will also reflect a modest
    sequential decrease and will be approximately flat year on year. Somewhat
    offsetting the decline in our Platforms products is an expected 15% to 20%
    increase in Software-Solutions.
  *Non-GAAP gross margin is expected to rise to approximately 34% to 36% of
    sales resulting from the expected sequential quarterly increase in high
    margin Software-Solutions revenue.
  *Non-GAAP R&D and SG&A expenses are expected to increase $0.5 million.
  *Non-GAAP net income is expected to be between a loss of $0.11 per share
    and earnings of $.01 per share.
  *An expected increase in Software-Solutions and ATCA revenue, combined with
    an approximate $1.0 million expense reduction is expected to enable the
    Company to restore non-GAAP profitability in the fourth quarter of 2013.

Mr. Bronson continued, “We are excited about the tangible momentum building
for our Software-Solutions offerings and believe our strategy will build
meaningful long-term shareholder value. I also feel very good about our plans
to maintain our leadership position in carrier grade platforms, while at the
same time improving the profitability of these products. We are building
momentum and taking the necessary steps to transform Radisys into a profitable
company with $240 to $250 million in revenue, approximately 40% gross margin,
and 10% operating income as we exit 2014.”

Conference Call and Webcast Information

Radisys will host a conference call on Tuesday, July 30, 2013 at 5:00 p.m. ET
to discuss its second quarter 2013 results and the financial and business
outlook for the third quarter 2013. To supplement the conference call Radisys
will also be presenting a slide deck which may be accessed per the details
included below.

To participate in the live conference call, dial 800-230-1085 in the U.S. and
Canada or 612-288-0329 for all other countries and reference conference ID #
298591. To access the live presentation please visit
https://www.webmeeting.att.com, and enter meeting # 5114686455 and participant
code # 904731. The live conference call will also be available via webcast on
the Radisys investor relations website at http://investor.radisys.com/.

A replay of the conference call will be available two hours after the call is
complete until 11:59 p.m. on Tuesday, August 13, 2013. To access the replay,
dial 800-475-6701 or 320-365-3844 and reference conference ID# 298591. A
replay of the webcast will be available for an extended period of time on the
Radisys investor relations website at http://investor.radisys.com/.

Forward-Looking Statements

This press release contains forward-looking statements, including statements
about the Company's business strategy, financial outlook and expectations for
the third and fourth quarters of 2013 and statements related to expense
savings or reductions, operational and administrative efficiencies, revenue
growth, margin improvement, financial performance and other attributes of the
Company. These forward-looking statements are based on the Company's
expectations and assumptions, as of the date such statements are made,
regarding the Company's future operating performance and financial condition,
the economy and other future events or circumstances. Actual results could
differ materially from the outlook guidance and expectations in these
forward-looking statements as a result of a number of risk factors, including,
among others, (a) the Company's dependence on certain customers and high
degree of customer concentration, (b) the Company's use of one contract
manufacturer for a significant portion of the production of its products, (c)
the anticipated amount and timing of revenues from design wins due to the
Company's customers' product development time, cancellations or delays, (d)
matters affecting the embedded system industry, including changes in industry
standards, changes in customer requirements and new product introductions, (e)
actions by regulatory authorities or other third parties, (f) cash generation,
(g) changes in tariff and trade policies and other risks associated with
foreign operations, (h) fluctuations in currency exchange rates, (i) the
ability of the Company to successfully complete any restructuring, acquisition
or divestiture activities, (j) the Company's ability to successfully manage
the transition from 10G to 40G ATCA product technologies, and (k) other
factors listed in the Company's reports filed with the Securities and Exchange
Commission (SEC), including those listed under “Risk Factors” in Radisys'
Annual Report on Form 10-K for the year ended December 31, 2012, copies of
which may be obtained by contacting the Company at 503-615-1100, from the
Company's investor relations web site at http://investor.radisys.com/, or at
the SEC's website at http://www.sec.gov. Although forward-looking statements
help provide additional information about Radisys, investors should keep in
mind that forward-looking statements are inherently less reliable than
historical information. Should one or more of these risks or uncertainties
materialize (or the other consequences of such a development worsen), or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those forecasted or expected. The Company believes its
expectations and assumptions are reasonable, but there can be no assurance
that the expectations reflected herein will be achieved. All information in
this press release is as of July 30, 2013. The Company undertakes no duty to
update any forward-looking statement to conform the statement to actual
results or changes in the Company's expectations.

Non-GAAP Financial Measures

To supplement its consolidated financial statements in accordance with
generally accepted accounting principles (GAAP), the Company's earnings
release contains non-GAAP financial measures that exclude certain expenses,
gains and losses, such as the effects of (a) purchase accounting adjustments,
(b) amortization of acquired intangible assets, (c) stock-based compensation
expense, (d) restructuring and acquisition-related charges (reversals), net,
(e) impairment of goodwill, and (f) non-cash income tax expense. The Company
believes that the use of non-GAAP financial measures provides useful
information to investors to gain an overall understanding of its current
financial performance and its prospects for the future. Specifically, the
Company believes the non-GAAP results provide useful information to both
management and investors by excluding certain expenses, gains and losses that
the Company believes are not indicative of its core operating results. In
addition, non-GAAP financial measures are used by management for budgeting and
forecasting as well as subsequently measuring the Company's performance, and
the Company believes that it is providing investors with financial measures
that most closely align to its internal measurement processes. These non-GAAP
measures are considered to be reflective of the Company's core operating
results as they more closely reflect the essential revenue-generating
activities of the Company and direct operating expenses (resulting in cash
expenditures) needed to perform these revenue-generating activities. The
Company also believes, based on feedback provided to the Company during its
earnings calls' Q&A sessions and discussions with the investment community,
that the non-GAAP financial measures it provides are necessary to allow the
investment community to construct their valuation models to better align its
results and projections with its competitors and market sector, as there is
significant variability and unpredictability across companies with respect to
certain expenses, gains and losses.

The non-GAAP financial information is presented using a consistent methodology
from quarter-to-quarter and year-to-year. These measures should be considered
in addition to results prepared in accordance with GAAP. In addition, these
non-GAAP financial measures are not based on any comprehensive set of
accounting rules or principles. The Company believes that non-GAAP financial
measures have limitations in that they do not reflect all of the amounts
associated with the Company's results of operations as determined in
accordance with GAAP and that these measures should only be used to evaluate
the Company's results of operations in conjunction with the corresponding GAAP
financial measures.

A reconciliation of non-GAAP information to GAAP information is included in
the tables below. The non-GAAP financial measures disclosed by the Company
should not be considered a substitute for or superior to financial measures
calculated in accordance with GAAP, and reconciliations between GAAP and
non-GAAP financial measures included in this earnings release should be
carefully evaluated. The non-GAAP financial measures used by the Company may
be calculated differently from, and therefore may not be comparable to,
similarly titled measures used by other companies.

About Radisys

Radisys (NASDAQ: RSYS) is a market leader enabling wireless infrastructure
solutions for telecom, aerospace, and defense applications. Radisys'
market-leading ATCA, IP Media Server and Com Express platforms coupled with
world-renowned Trillium software, services and market expertise enable
customers to bring high-value products and services to market faster with
lower investment and risk. Radisys solutions are used in a wide variety of 3G
& 4G / LTE mobile network applications including: Radio Access Networks (RAN)
solutions from femtocells to picocells and macrocells, wireless core network
applications, Deep Packet Inspection (DPI) and policy management; conferencing
and media services including voice, video and data, as well as customized
mobile network applications that support the aerospace, defense and public
safety markets.

         Radisys® and Trillium® are registered trademarks of Radisys.

                                                     
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
                                                              
                                                              
                                Three Months Ended            Six Months Ended
                                June 30,                      June 30,
                                2013         2012           2013          2012
Revenues                        $ 65,438     $ 77,584       $ 133,616       $ 153,071
Cost of sales:
Cost of sales                   43,756         48,542         90,062          98,547
Amortization of
purchased                       2,218       2,391         4,435          4,833     
technology
Gross margin                    19,464         26,651         39,119          49,691
Operating expenses:
Research and                    12,020         11,713         23,555          24,259
development
Selling, general                9,527          10,173         20,623          22,173
and administrative
Intangible assets               1,304          1,304          2,608           2,608
amortization
Restructuring and
acquisition-related             (114     )   1,039         1,156          2,483     
charges, net
Income (loss) from              (3,273   )     2,422          (8,823    )     (1,832    )
operations
Interest expense                (281     )     (422     )     (613      )     (843      )
Other income, net               226         126           373            290       
Income (loss)
before income tax               (3,328   )     2,126          (9,063    )     (2,385    )
expense
Income tax expense              784         819           1,606          1,123     
Net income (loss)               $ (4,112 )   $ 1,307       $ (10,669 )     $ (3,508  )
                                                                              
Net income (loss)
per share:
Basic                           $ (0.14  )   $ 0.05        $ (0.37   )     $ (0.13   )
Diluted (I),(II)                $ (0.14  )   $ 0.05        $ (0.37   )     $ (0.13   )
Weighted average
shares outstanding
Basic                           28,669      26,759        28,570         26,708    
Diluted (I),(II)                28,669      28,256        28,570         26,708    
                                                                                        

(I) For all periods presented, the computation of diluted earnings per share
excludes the effects of the Company's 2013 and 2015 convertible senior notes,
as they are anti-dilutive.

(II) For the three months ended June 30, 2012, the computation of earnings per
share includes the effects of stock options, restricted stock units and escrow
shares. For the three months ended June 30, 2013 and the six months ended June
30, 2013 and 2012, the computation of earnings per share excludes the effects
of stock options, restricted stock units and escrow shares, as they are
anti-dilutive.

                                                 
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
                                                                  
                                                                  
                                                June 30,          December 31,
                                                2013              2012
ASSETS
Current assets:
Cash and cash                                   $ 33,926          $  33,182
equivalents
Accounts receivable,                            45,176            51,289
net
Inventories and
inventory deposit,                              25,060            28,907
net
Other current assets                            12,449           12,610     
Total current assets                            116,611           125,988
Property and                                    16,933            17,713
equipment, net
Intangible assets,                              63,242            70,284
net
Other assets, net                               14,171           18,409     
Total assets                                    $ 210,957        $  232,394 
                                                                  
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                                $ 36,408          $  41,191
Deferred income                                 6,534             9,222
Other accrued                                   14,483            16,769
liabilities
Convertible senior                              —                 16,919
notes, net
Line of credit                                  15,000           —          
Total current                                   72,425            84,101
liabilities
Convertible senior                              18,000            18,000
notes, net
Other long-term                                 4,328            4,851      
liabilities
Total liabilities                               94,753           106,952    
Shareholders'
equity:
Common stock                                    306,254           303,724
Accumulated deficit                             (190,355  )       (179,686   )
Accumulated other                               305              1,404      
comprehensive income
Total shareholders’                             116,204          125,442    
equity
Total liabilities
and shareholders’                               $ 210,957        $  232,394 
equity
                                                                             


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)


                   Three Months Ended                Six Months Ended
                         June 30,                              June 30,
                         2013           2012               2013            2012
Cash flows
from                                   
operating
activities:
Net income               $ (4,112 )         $ 1,307            $ (10,669 )         $ (3,508 )
(loss)
Adjustments
to reconcile
net income
(loss) to
net cash
provided by
operating
activities:
Depreciation
and                      5,582              5,692              11,106              11,330
amortization
Stock-based
compensation             1,023              (1,506   )         2,122               (584     )
expense
Write off of
purchased                (200     )         —                  2,868               —
computer
software
Net gain
from sale of             43                 —                  (1,532    )         —
software
assets
Other                    (320     )         1,150              145                 1,869
adjustments
Changes in
operating
assets and
liabilities:
Accounts                 5,341              (1,074   )         6,671               824
receivable
Inventories
and                      (1,288   )         (1,121   )         3,093               3,617
inventory
deposit
Accounts                 (730     )         2,475              (4,961    )         979
payable
Deferred                 (968     )         208                (2,743    )         (3,172   )
income
Other
operating                (188     )     (3,015   )         (1,000    )         (8,101   )
assets and
liabilities
Net cash
provided by              4,183         4,116             5,100              3,254    
operating
activities
Cash flows
from
investing
activities:
Capital                  (1,679   )         (2,257   )         (3,378    )         (5,831   )
expenditures
Proceeds
from sale of             (98      )     —                 1,082              —        
software
assets
Net cash
used in                  (1,777   )     (2,257   )         (2,296    )         (5,831   )
investing
activities
Cash flows
from
financing
activities:
Borrowings
on line of               —                  —                  15,000              —
credit
Repayment of
convertible              —                  —                  (16,919   )         —
senior notes
Proceeds
from                     199                379                418                 810
issuance of
common stock
Other
financing                (395     )     (28      )         (413      )         (42      )
activities,
net
Net cash
provided by
(used in)                (196     )     351               (1,914    )         768      
financing
activities
Effect of
exchange
rate changes             (32      )     (199     )         (146      )         (109     )
on cash and
cash
equivalents
Net increase
(decrease)
in cash and              2,178              2,011              744                 (1,918   )
cash
equivalents
Cash and
cash
equivalents,             31,748        43,841            33,182             47,770   
beginning of
period
Cash and
cash
equivalents,             $ 33,926      $ 45,852          $ 33,926           $ 45,852 
end of
period
                                                                                            

                                                                
REVENUES BY GEOGRAPHY
(In thousands, unaudited)
                                                                                                                          
                                                                                                                          
            Three Months Ended                                        Six Months Ended
            June 30,                                                 June 30,                                            
            2013                     2012                        2013                      2012                  
North       $ 30,512    46.6  %       $ 26,391    34.0  %       $ 57,214     42.8  %       $ 55,952     36.5  %
America
Asia        19,432         29.7  %       38,822         50.1  %       45,954          34.4  %       65,300          42.7  %
Pacific
Europe,
the
Middle      15,494      23.7  %       12,371      15.9  %       30,448       22.8  %       31,819       20.8  %
East
and
Africa
Total       $ 65,438    100.0 %       $ 77,584    100.0 %       $ 133,616    100.0 %       $ 153,071    100.0 %
                                                                                                                          

                                                                           
REVENUES BY PRODUCT GROUP
(In thousands, unaudited)
                                                                                                                                     
                                                                                                                                     
                       Three Months Ended                                        Six Months Ended
                       June 30,                                                 June 30,                                            
                       2013                     2012                        2013                      2012                  
ATCA Platforms         $ 31,722    48.5  %       $ 36,518    47.1  %       $ 66,540     49.8  %       $ 74,181     48.5  %
Software-Solutions     12,612         19.3          16,102         20.7          24,261          18.1          28,162          18.4
COM Express and        14,218         21.7          11,931         15.4          28,845          21.6          24,103          15.7
Rackmount Server
Other Products         6,886       10.5         13,033      16.8         13,970       10.5         26,625       17.4  
Total Revenues         $ 65,438    100.0 %       $ 77,584    100.0 %       $ 133,616    100.0 %       $ 153,071    100.0 %
                                                                                                                                     

                                                                           
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES AND AS A PERCENT OF REVENUES
(In thousands, except per share amounts, unaudited)
                                                                                                                                    
                                                                                                                                    
                        Three Months Ended                                       Six Months Ended
                        June 30,                                                June 30,                                           
                        2013                     2012                       2013                      2012                 
REVENUES:                                                                                                             
GAAP revenues           $ 65,438                 $ 77,584                $ 133,616                 $ 153,071    
(a) Purchase
accounting              —                        111                     —                         300          
adjustments
Non-GAAP revenues       $ 65,438                 $ 77,695                $ 133,616                 $ 153,371    
                                                                                                                               
GROSS MARGIN:
GAAP gross margin       $ 19,464    29.7 %        $ 26,651    34.4 %       $ 39,119     29.3 %        $ 49,691     32.5 %
(a) Purchase
accounting              —                            111                         —                             300
adjustments
(b) Amortization of
acquired intangible     2,218                        2,391                       4,435                         4,833
assets
(c) Stock-based         111                          (134     )                  241                           (205      )
compensation
(d) Restructuring
and                     —                        57                      —                         62           
acquisition-related
charges, net
Non-GAAP gross          $ 21,793    33.3 %        $ 29,076    37.4 %       $ 43,795     32.8 %        $ 54,681     35.7 %
margin
                                                                                                                               
RESEARCH AND
DEVELOPMENT:
GAAP research and       $ 12,020    18.4 %        $ 11,713    15.1 %       $ 23,555     17.6 %        $ 24,259     15.8 %
development
(c) Stock-based         (234     )                296                     (483      )                (31       )   
compensation
Non-GAAP research       $ 11,786    18.0 %        $ 12,009    15.5 %       $ 23,072     17.3 %        $ 24,228     15.8 %
and development
                                                                                                                               
SELLING, GENERAL
AND ADMINISTRATIVE:
GAAP selling,
general and             $ 9,527     14.6 %        $ 10,173    13.1 %       $ 20,623     15.4 %        $ 22,173     14.5 %
administrative
(c) Stock-based         (678     )                1,076                   (1,398    )                410          
compensation
Non-GAAP selling,
general and             $ 8,849     13.5 %        $ 11,249    14.5 %       $ 19,225     14.4 %        $ 22,583     14.7 %
administrative
                                                                                                                               
INCOME (LOSS) FROM
OPERATIONS:
GAAP income (loss)      $ (3,273 )   (5.0 )%       $ 2,422     3.1  %       $ (8,823  )   (6.6 )%       $ (1,832  )   (1.2 )%
from operations
(a) Purchase
accounting              —                            111                         —                             300
adjustments
(b) Amortization of
acquired intangible     3,522                        3,695                       7,043                         7,441
assets
(c) Stock-based         1,023                        (1,506   )                  2,122                         (584      )
compensation
(d) Restructuring
and                     (114     )                1,096                   1,156                     2,545        
acquisition-related
charges, net
Non-GAAP income         $ 1,158     1.8  %        $ 5,818     7.5  %       $ 1,498      1.1  %        $ 7,870      5.1  %
from operations
                                                                                                                               
NET INCOME (LOSS):
GAAP net income         $ (4,112 )   (6.3 )%       $ 1,307     1.7  %       $ (10,669 )   (8.0 )%       $ (3,508  )   (2.3 )%
(loss)
(a) Purchase
accounting              —                            111                         —                             300
adjustments
(b) Amortization of
acquired intangible     3,522                        3,695                       7,043                         7,441
assets
(c) Stock-based         1,023                        (1,506   )                  2,122                         (584      )
compensation
(d) Restructuring
and                     (114     )                   1,096                       1,156                         2,545
acquisition-related
charges, net
(f) Income taxes        440                      512                     973                       645          
Non-GAAP net income     $ 759       1.2  %        $ 5,215     6.7  %       $ 625        0.5  %        $ 6,839      4.5  %
                                                                                                                               
GAAP weighted
average diluted         28,669                       28,256                      28,570                        26,708
shares
Escrow shares           —                            —                           30                            1,344
Dilutive equity
awards included in      729                          630                         715                           814
non-GAAP earnings
per share
Convertible senior
notes dilutive          —                        3,470                   —                         —            
shares (I)
Non-GAAP weighted
average diluted         29,398                   32,356                  29,315                    28,866       
shares (I)
GAAP net loss per       $ (0.14  )                   $ 0.05                      $ (0.37   )                   $ (0.13   )
share (diluted)
Non-GAAP
adjustments             0.17                     0.12                    0.39                      0.37         
detailed above
Non-GAAP net income
per share (diluted)     $ 0.03                   $ 0.17                  $ 0.02                    $ 0.24       
(I)
                                                                                                                               

(I) For the three months ended June 30, 2012, the diluted earnings per share
calculation includes interest costs, net of tax benefit, related to dilutive
equity shares underlying our 2013 and 2015 convertible senior notes. For the
three months ended June 30, 2013 and the six months ended June 30, 2013 and
2012, the diluted earnings per share calculation excludes the effects of the
Company's 2013 and 2015 convertible senior notes, as they are anti-dilutive.

                                                
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE
NET INCOME (LOSS) PER SHARE
(In millions, except per share amounts, unaudited)
                                                       
                                                       Three Months Ended
                                                       September 30, 2013
                                                       Low End     High End
GAAP net loss                                          $ (12.8 )     $ (9.0  )
(b) Amortization of acquired intangible                3.4           3.4
assets
(c) Stock-based compensation                           1.2           1.2
(d) Restructuring and acquisition-related              4.2           4.2
charges, net
(f) Income taxes                                       0.8          0.5     
Total adjustments                                      9.6          9.3     
Non-GAAP net income (loss)                             $ (3.2  )     $ 0.3   
                                                                     
GAAP weighted average shares                           28,900        28,900
Non-GAAP adjustments                                   —            800     
Non-GAAP weighted average shares (diluted)             28,900       29,700  
(I)
                                                                     
GAAP net loss per share                                $ (0.44 )     $ (0.31 )
Non-GAAP adjustments detailed above                    0.33         0.32    
Non-GAAP net income (loss) per share                   $ (0.11 )     $ 0.01  
(diluted) (I)
                                                                             

(I) For the three months ended September 30, 2013 guidance for the diluted
earnings per share calculation excludes the effects of the shares underlying
our convertible senior notes as the inclusion would be anti-dilutive.

                                                   
                                                            
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE
GROSS MARGIN
(unaudited)
                                                            
                                                            Estimates at the
                                                            midpoint of the
                                                            guidance range
                                                            Three Months Ended
                                                            September 30, 2013
GAAP                                                        31.3%
(b) Amortization of acquired intangible                     3.4
assets
(c) Stock-based compensation                                0.3
Non-GAAP                                                    35.0%
                                                            

                                    
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE
RESEARCH AND DEVELOPMENT EXPENSE AND
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
(In millions, unaudited)
                                             
                                             Estimates at the
                                             midpoint of the
                                             guidance range
                                             Three Months Ended
                                             September 30, 2013
GAAP                                         $      22.3
(c) Stock-based compensation                 (1.1)
Non-GAAP                                     $      21.2
                                                    

The Company excludes the following expenses, reversals, gains and losses from
its non-GAAP financial measures, when applicable:

(a) Purchase accounting adjustments: Purchase accounting adjustments
consistent of the impact to revenues and cost of sales associated with
adjusting deferred revenue and inventories of acquired companies to fair
value. For deferred revenue, as is the case with our existing business, at the
time of acquisition, the acquired business recorded deferred revenue related
to past transactions for which revenue would have been recognized by the
acquired entity in future periods as revenue recognition criteria were
satisfied. However, purchase accounting rules require us to write down a
portion of this deferred revenue to its then current fair value, which is
equivalent to the cost to complete the outstanding obligations required to
earn the deferred revenue plus a reasonable margin. Consequently, in
post-acquisition periods, we do not recognize the full amount of this deferred
revenue. When measuring the performance of our business, however, we add back
non-GAAP revenue associated with deferrals for which no future obligations
existed as well as obligations we assumed to provide maintenance or support to
customers of the acquired business that were excluded as a result of these
purchase accounting adjustments. We believe that the non-GAAP revenue
disclosures enhance investors' ability to conduct period-over-period analyses
of our results that reflect the full impact of the acquired business's results
together with the results from our pre-existing products and services.

In addition, the non-GAAP financial results exclude the impact to cost of
sales from the markup of inventories required by GAAP as part of the fair
value adjustments required under purchase accounting for business
combinations. This results from marking the acquired company's inventory to
fair value at the time of acquisition. This charge is not factored into
management's evaluation of potential acquisitions or our performance after
completion of acquisitions, because it is not related to our core operating
performance, and the frequency and amount of this type of charge can vary
significantly based on the size and timing of our acquisitions. Excluding this
data provides investors with a basis to compare the company against the
performance of other companies without this variability.

(b) Amortization of acquired intangible assets: Amortization of
acquisition-related intangible assets primarily relate to core and existing
technologies, patents, trade name and customer relationships that were
acquired with the acquisitions of Continuous Computing, Convedia, MCPD and
Pactolus. The Company excludes the amortization of acquisition-related
intangible assets because it does not reflect the Company's ongoing business
and it does not have a direct correlation to the operation of the Company's
business. In addition, in accordance with GAAP, the Company generally
recognizes expenses for internally-developed intangible assets as they are
incurred, notwithstanding the potential future benefit such assets may
provide. Unlike internally-developed intangible assets, however, and also in
accordance with GAAP, the Company generally capitalizes the cost of acquired
intangible assets and recognizes that cost as an expense over the useful lives
of the assets acquired. As a result of their GAAP treatment, there is an
inherent lack of comparability between the financial performance of
internally-developed intangible assets and acquired intangible assets.
Accordingly, the Company believes it is useful to provide, as a supplement to
its GAAP operating results, non-GAAP financial measures that exclude the
amortization of acquired intangibles in order to enhance the
period-over-period comparison of its operating results, as there is
significant variability and unpredictability across companies with respect to
this expense.

(c) Stock-based compensation: Stock-based compensation consists of expenses
recorded under GAAP, in connection with stock awards such as stock options,
restricted stock awards and restricted stock units granted under the Company's
equity incentive plans and shares issued pursuant to the Company's employee
stock purchase plan. The Company excludes stock-based compensation from
non-GAAP financial measures because it is a non-cash measurement that does not
reflect the Company's ongoing business and because the Company believes that
investors want to understand the impact on the Company of the adoption of the
applicable GAAP surrounding share based payments; the Company believes that
the provision of non-GAAP information that excludes stock-based compensation
improves the ability of investors to compare its period-over-period operating
results, as there is significant variability and unpredictability across
companies with respect to this expense.

(d) Restructuring and acquisition-related charges, net: Restructuring and
acquisition-related charges, net: Restructuring primarily relates to
activities engaged in by the Company's management to simplify and focus its
infrastructure. Restructuring and other charges are excluded from non-GAAP
financial measures because they are not considered core operating activities.
Although the Company has engaged in various restructuring activities over the
past several years, each has been a discrete event based on a unique set of
business objectives. The Company does not engage in restructuring activities
in the ordinary course of business. As such, the Company believes it is
appropriate to exclude restructuring charges from its non-GAAP financial
measures because it enhances the ability of investors to compare the Company's
period-over-period operating results.

In addition to restructuring activities, we exclude certain other
acquisition-related items including the following, when applicable: (i)
integration related charges; and (ii) acquisition-related charges.
Acquisitions result in non-recurring operating expenses, which would not
otherwise have been incurred by us in the normal course of our business
operations. Integration charges include, among other things, expenses
associated with operational consolidation, training, rebranding and
consulting. Acquisition-related charges include transaction fees and legal and
professional service expenses incurred in connection with our acquisitions. We
believe that providing non-GAAP information for acquisition-related expense
items in addition to the corresponding GAAP information allows the users of
our financial statements to better review and understand the historic and
current results of our continuing operations, and also facilitates comparisons
to less acquisitive peer companies.

(e) Impairment of goodwill: The goodwill impairment charge relates to a write
down of balances associated with previous acquisitions. The Company excludes
the goodwill impairment charge because it is unusual in nature and does not
reflect the operation of the Company's ongoing business. Additionally, its
exclusion enhances the ability of investors to compare the Company’s
period-over-period operating results.

(f) Income taxes: Non-GAAP income tax expense is equal to the Company's
projected cash tax expense. Adjustments to GAAP income tax expense are
required to eliminate the recognition of tax expense from profitable entities
where we utilize deferred tax assets to offset current period tax liabilities.
We believe that providing this non-GAAP figure is useful to our investors as
it more closely represents the true economic impact of our tax positions.

Contact:

Radisys Corporation
Allen Muhich, 503-615-1616
Chief Financial Officer
allen.muhich@radisys.com
 
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