Dialogic Inc. Reports Third Quarter 2013 Financial Results

  Dialogic Inc. Reports Third Quarter 2013 Financial Results

Business Wire

MILPITAS, Calif. -- November 14, 2013

Dialogic Inc. (OTCQB:DLGC), the Network Fuel^® company, today announced third
quarter results for the period ending September 30, 2013.

GAAP Results

Total Revenue for the third quarter of 2013 was $30.2 million compared to
$31.1 million in the second quarter of 2013 and $44.1 million in the third
quarter of 2012. Gross Margin for the third quarter of 2013 was 63.8% compared
to 57.6% in the second quarter of 2013 and 62.0% in the third quarter of 2012.
Operating Expense for the third quarter of 2013 was $17.5 million compared to
$23.2 million in the second quarter of 2013 and $26.4 million in the third
quarter of 2012. Net Income/(Loss) for the third quarter of 2013 was ($0.9)
million, or ($0.05) per share compared to ($5.7) million, or ($0.36) per
share, in the second quarter of 2013 and $0.8 million, or $0.08 per share, in
the third quarter of 2012. Cash on hand for the third quarter of 2013 was $4.5
million compared to $8.4 million in the second quarter of 2013 and $2.7
million in the third quarter of 2012.

Non-GAAP Results

Total Revenue for the third quarter of 2013 was $30.3 million compared to
$31.3 million in the second quarter of 2013 and $44.2 million in the third
quarter of 2012. Gross Margin for the third quarter of 2013 was 67.8% compared
to 61.8% in the second quarter of 2013 and 65.3% in the third quarter of 2012.
Operating Expense for the third quarter of 2013 was $18.3 million compared to
$20.6 million in the second quarter of 2013 and $23.9 million in the third
quarter of 2012. Adjusted EBITDA for the third quarter of 2013 was $2.3
million compared to ($1.2) million in the second quarter of 2013 and $5.0
million in the third quarter of 2012.

About Dialogic:

Dialogic (OTCQB: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 three months ended June 30, 2013, 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 and Network Fuel are registered trademarks of Dialogic Inc. or a
subsidiary. (DLGC-IR)

GAAP Financial Tables

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 items. 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 but
excludes restructuring and integration costs, product rationalization,
non-cash stock compensation expense, purchase accounting adjustments, SEC
inquiry expenses and other non-recurring transactions such as revenue
reversals and bad debt charges, as well as other income (expense) items which
include 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.
Unaudited Consolidated Statements of Operations (GAAP)
(In thousands, except per share data)
                                                            
                      Three Months Ended September  Nine Months Ended
                      30,                            September 30,
                        2013          2012      2013       2012    
Revenue:
Products              $  20,841        $  33,837     $ 68,325      $ 93,279
Services                9,366         10,251    26,752     29,808  
Total revenue           30,207        44,088    95,077     123,087 
                                                                   
Cost of
revenue:
Products                 6,944            11,654       25,389        38,329
Services                3,986         5,118     12,930     15,267  
Total cost of           10,930        16,772    38,319     53,596  
revenue
Gross profit            19,277        27,316    56,758     69,491  
                                                                   
Operating
expenses:
Research and
development,             5,881            9,266        20,997        33,459
net
Sales and                7,615            9,261        25,219        31,935
marketing
General and              6,280            7,375        21,869        23,766
administrative
Restructuring           (2,323  )      457       (1,997  )   4,760   
charges, net
Total operating         17,453        26,359    66,088     93,920  
expenses
Income (loss)            1,824            957          (9,330  )     (24,429 )
from operations
                                                                   
Other income
(expense):
Interest and
other income,            109              242          56            95
net
Interest                 (2,620  )        (1,792 )     (7,519  )     (8,836  )
expense
Change in fair
value of                 118              1,750        1,391         2,154
warrants
Foreign
exchange loss,          (8      )      (278   )   (919    )   (1,047  )
net
Total other             (2,401  )      (78    )   (6,991  )   (7,634  )
expense, net
(Loss) income
before                   (577    )        879          (16,321 )     (32,063 )
provision for
income taxes
Income tax              274           56        577        304     
provision
Net (loss)            $  (851    )    $  823      $ (16,898 )  $ (32,367 )
income
                                                                   
Net (loss)
income per            $  (0.05   )     $  0.08       $ (1.11   )   $ (4.24   )
share - basic
and diluted
Weighted
average shares
of common stock
used in
calculation of
net (loss)
income per              16,046        10,229    15,227     7,634   
share - basic
and diluted
                                                                   

                                                             
Dialogic Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)
                                                  September 30,  December 31,
                                                    2013        2012     
                                                  (unaudited)
ASSETS
Current assets:
Cash and cash equivalents                         $  4,511        $ 6,501
Restricted cash                                      1,180          900
Accounts receivable, net of allowance of             22,304         32,422
$2,142 and $1,217, respectively
Inventory                                            6,396          8,874
Other current assets                                6,855       8,993    
Total current assets                                 41,246         57,690
Property and equipment, net                          4,587          5,978
Intangible assets, net                               20,656         25,089
Goodwill                                             31,223         31,223
Other assets                                        2,036       2,147    
Total assets                                      $  99,748     $ 122,127  
                                                                  
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable                                  $  10,349       $ 16,994
Accrued liabilities                                  13,352         21,270
Deferred revenue, current portion                    13,989         12,742
Bank indebtedness                                    12,475         11,717
Income taxes payable                                756         1,007    
Total current liabilities                            50,921         63,730
Long-term debt, related parties, net of              73,074         66,536
discount
Warrants                                             594            1,985
Other long-term liabilities                         5,707       8,978    
Total liabilities                                    130,296        141,229
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 16,179,809 and 14,415,652                16             14
shares, respectively
Additional paid-in capital                           262,893        257,658
Accumulated other comprehensive loss                 (22,208  )     (22,423  )
Accumulated deficit                                 (271,249 )   (254,351 )
Total stockholders' deficit                         (30,548  )   (19,102  )
Total liabilities and stockholders' deficit       $  99,748     $ 122,127  
                                                                  

                                                                                                                            
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended September 30, 2013
(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             $ 20,841     -              -               -                 -              35            -         -             $ 20,876
Services               9,366      -              -               -                 -              58            -         -               9,424
                                                                                                                                        
Cost of
revenue:
Products               6,944      (1,166   )     -               -                 (20     )      -             -         -               5,758
Services               3,986      -              -               -                 -              -             -         -               3,986
                                                                                                                                        
Operating
expenses:
Research and
development,           5,881      (207     )     -               -                 (25     )      -             -         -               5,649
net
Sales and              7,615      (372     )     -               -                 (61     )      -             -         -               7,182
marketing
General and            6,280      (512     )     (24       )     -                 (362    )      -             66        7               5,455
administrative
Restructuring          (2,323 )   -              2,323           -                 -              -             -         -               -
charges, net
                                                                                                                                        
Total other            (2,401 )   -              -               -                 -              -             -         2,401           -
expense, net
Income tax            274      -            -             -               -            -           -       (274    )     -      
provision
Net (loss)           $ (851   )  2,257        (2,299    )    -               468          93          (66  )   2,668       $ 2,270  
income
                                                                                                                                        
Net (loss)
income per           $ (0.05  )                                                                                                         $ 0.14
share - basic
and diluted
Weighted
average shares
of common
stock used in
calculation of
net (loss)
income per            16,046                                                                                                           16,046 
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             $ 33,837     -              -               -                 -              165           -         -             $ 34,002
Services               10,251     -              -               -                 -              (77     )     -         -               10,174
                                                                                                                                        
Cost of
revenue:
Products               11,654     (1,226   )     -               (516      )       (86     )      371           -         -               10,197
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, net
                                                                                                                                        
Total other            (78    )   -              -               -                 -              -             -         78              -
expense, net
Income tax            56       -            -             -               -            -           -       (56     )     -      
provision
Net income           $ 823      2,290        920           516             645          (431    )    64      134         $ 4,961  
                                                                                                                                        
Net income per
share - basic        $ 0.08                                                                                                             $ 0.49
and diluted
Weighted
average shares
of common
stock used in
calculation of
net income per        10,229                                                                                                           10,229 
share - basic
and diluted
                                                                                                                                        
Dialogic Inc.
Reconciliation of Condensed Consolidated Statement of Operations to Adjusted EBITDA Results
Three Months Ended June 30, 2013
(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             $ 22,751     -              -               -                 -              92            -         -             $ 22,843
Services               8,324      -              -               -                 -              131           -         -               8,455
                                                                                                                                        
Cost of
revenue:
Products               8,868      (1,167   )     -               -                 (40     )      -             -         -               7,661
Services               4,303      -              -               -                 -              -             -         -               4,303
                                                                                                                                        
Operating
expenses:
Research and
development,           7,083      (265     )     -               -                 (53     )      -             -         -               6,765
net
Sales and              8,356      (373     )     -               -                 (120    )      -             -         -               7,863
marketing
General and            7,629      (484     )     (558      )     -                 (448    )      -             28        (216    )       5,951
administrative
Restructuring          114        -              (114      )     -                 -              -             -         -               -
charges, net
                                                                                                                                        
Total other            (616   )   -              -               -                 -              -             -         616             -
expense, net
Income tax            (207   )  -            -             -               -            -           -       207          -      
benefit
Net loss             $ (5,687 )  2,289        672           -               661          223         (28  )   625         $ (1,245 )
                                                                                                                                        
Net loss per
share - basic        $ (0.36  )                                                                                                         $ (0.08  )
and diluted
Weighted
average shares
of common
stock used in
calculation of
net loss per          15,907                                                                                                           15,907 
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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