ShoreTel® (NASDAQ: SHOR), the leading provider of brilliantly simple phone systems and unified communications (UC) solutions, today announced financial results for the third quarter of its fiscal year 2014, which ended 31 March 2014.
For the third quarter of fiscal 2014, total revenue was US$82.4 million, an increase of 5 per cent compared to the third quarter of fiscal 2013. Non-GAAP net income, which excludes stock-based compensation charges, amortisation of acquisition-related intangibles, other charges and related tax adjustments, for the third quarter of fiscal year 2014, was US$2.6 million, or US$0.04 per share. This compares with a non-GAAP net loss of US$0.3 million, or US$0.01 per share, in the third quarter of fiscal 2013. GAAP net loss was US$1.2 million, or US$0.02 per share, in the third quarter of fiscal 2014, compared with a GAAP net loss of US$5.0 million, or US$0.09 per share, in the third quarter of fiscal 2013.
“In the third quarter we launched a number of growth initiatives, invested in infrastructure enhancements, introduced innovative new products and achieved the highest level of cloud bookings in company history. I am excited that our sales and go-to-market strategy are starting to pay off said Don Joos, President and CEO of ShoreTel. “During this time, we earned a non-GAAP net income for the fourth consecutive quarter.”
Third Quarter of Fiscal 2014 Financial Highlights
Recurring revenues, which consist of cloud monthly recurring revenues and support revenues, represented 40 per cent of total revenue in the third quarter of fiscal 2014 and reached an annualised value of US$130 million; an increase of 20 per cent compared to the third quarter of fiscal 2013.
Non-GAAP gross margin on total revenue, which excludes stock-based compensation charges, amortisation of acquisition-related intangibles and other charges, for the third quarter of fiscal year 2014, was 60.1 per cent, compared with 62.1 per cent in the year-ago period. GAAP gross margin for the third quarter of fiscal year 2014 was 58.4 per cent, compared with 60.6 per cent in the third quarter of fiscal year 2013.
Hosted revenues of US$22.6 million were up 24 per cent year-over-year and 4 per cent sequentially. Non-GAAP gross margin on hosted revenues was 41.1 per cent in the third quarter of fiscal 2014, compared with 41.7 per cent in the third quarter of fiscal 2013. The total number of installed customer seats increased 37 per cent over the third quarter of fiscal 2013 to approximately 142,000. Annualised revenue churn was approximately 5 per cent for the third quarter of fiscal 2014 and continued to reflect industry low results.
Product revenues of US$43.4 million were down 5 per cent year-over-year and 7 per cent sequentially. Non-GAAP gross margin on product revenues was 64.2 per cent in the third quarter of fiscal 2014, compared with 66.8 per cent in the third quarter of fiscal 2013.
Support and services revenues of US$16.4 million were up 12 per cent year-over-year and 1 per cent sequentially. Non-GAAP gross margin in support and service revenues was 75.4 per cent in the third quarter of fiscal 2014, compared with 73.1 per cent in the third quarter of fiscal 2013.
The company had US$53.9 million in cash, cash equivalents and short-term investments as of 31 March 2014. During the third quarter of fiscal 2014 the company reduced its outstanding debt obligations, net of debt issuance costs, to US$4.1 million.
Third Quarter of Fiscal 2014 Business Highlights
ShoreTel Expands Cloud Opportunity for Channel Partners
ShoreTel announced enhancements to its Champion Partner Programme to increase the focus on the growing cloud communications segment. To meet the demand for cloud UC, ShoreTel’s programme includes three tiers of channel partner engagement - Enabled, Approved and Referral. Partners participating in the Enabled and Approved tiers handle large portions of the sales process and receive recurring compensation payments. The programme supports the channel partners’ ability to grow revenues, improve profitability through in-depth training to execute lead generation actions and to gain technical expertise.
ShoreTel Announces Vertical Sales Program for Finance Industry
ShoreTel, which has more than 1,000 banking, credit union and financial customers, created a dedicated vertical sales team to deliver solutions to the finance business segment. Currently, ShoreTel provides products to address industry issues relating to multi-site deployments and business continuity planning. The increased focus on the sector will include product development and integration with industry specific software and security programmes.
ShoreTel Begins Shipping its 400 Series IP Phones for ShoreTel Sky
ShoreTel began shipping its 400 series IP phones to ShoreTel Sky® customers to offer an end-to-end cloud solution for an optimal user experience by linking the phones, ShoreTel-developed business software applications and world-class support. ShoreTel now has full control of the evolution of devices used by customers to enable superior support and implementation of upgrades in the future.
ShoreTel linked the timing of the 400 series phone launch for ShoreTel Sky customers and the enhancements made to its Champion Partner Programme. ShoreTel partners can now offer customers one ShoreTel solution to address their cloud UC needs.
ShoreTel Upgrades its Integration with Salesforce for Cloud and Premises Customers
ShoreTel announced a significant upgrade to its Salesforce® integration for both cloud and premises customers. End users that integrate their communications platform with the leading CRM application gain new customer insights, more effective collaboration and quicker problem resolution. As a result, an enterprise can experience improvement in both sales force productivity and customer service responsiveness, both of which generate additional revenues.
ShoreTel Delivers Virtualisation to Customers
ShoreTel launched ShoreTel 14.2 which allows companies to deploy a communications system in a virtual environment and benefit from ShoreTel’s inherent N+1 redundancy at a lower cost.
The availability of ShoreTel’s virtualisation technology is changing how UC is deployed across small, medium and enterprise customers. The offering sets the foundation to consume VoIP services via on-premises, hybrid and cloud deployments.
ShoreTel Awarded 5-Star Rating in CRN’s 2014 Partner Program Guide
The CRN 2014 Partner Programme Guide, the definitive listing of technology vendors that provide products through the IT channel, awarded ShoreTel a 5-star rating. The award follows ShoreTel’s recent enhancement of its Champion Partner Programme to enable channel partners to better participate in one of the fastest growing communications segments. Amongst other things, the enhanced Champion Partner Programme includes workshops to facilitate cloud business planning, technical expertise and sales professional recruiting assistance.
Business Outlook
ShoreTel is providing the following outlook for its fiscal fourth quarter of 2014 ending 30 June 2014:
Total revenue is expected to be in the range of US$83 million to US$89 million.
GAAP gross margin is expected to be in the range of 59 per cent to 60 per cent. Non-GAAP gross margin, which excludes approximately US$1.4 million in stock-based compensation charges, amortisation of acquisition-related intangibles and other charges, is expected to be in the range of 60.5 per cent to 61.5 per cent.
GAAP operating expenses are expected to be in the range of US$50 million to US$51 million. Non-GAAP operating expenses, which excludes approximately US$2.5 million in stock-based compensation expenses, amortisation of acquisition-related intangibles and other charges, are expected to be in the range of US$47.5 million to US$48.5 million.
Conference Call Information
The Company hosted a corresponding conference call and live webcast at 2:00 p.m. Pacific Time on Thursday, 24 April 2014.
A live webcast was available in the Investor Relations section of the Company's corporate website at ir.shoretel.com/ and an archived recording is available now. An audio telephonic replay of the conference call is available until 2 May 2014 by dialing +1-877-344-7529 for callers in the U.S. or +1-412-317-0088 for callers outside the U.S. and providing the conference identification number of 10044502.
Use of Non-GAAP Financial Measures
ShoreTel reports all required financial information in accordance with generally accepted accounting principles in the United States GAAP, but it believes that evaluating its ongoing operating results may be difficult to understand if limited to reviewing only GAAP financial measures. Many investors have requested that ShoreTel disclose this non-GAAP information because it is useful in understanding the company’s performance as it excludes non-cash charges, other non-recurring adjustments and related tax adjustments, that many investors feel may obscure the company’s true operating performance. Likewise, management uses these non-GAAP measures to manage and assess the profitability of its business and does not consider stock-based compensation charges and amortisation charges related to acquisition-related intangible assets and the related tax adjustments, which are non-cash charges, or other non-recurring items in managing its core operations. ShoreTel has provided a reconciliation of non-GAAP financial measures following the text of this press release. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.
Legal Notice Regarding Forward-Looking Statements
ShoreTel assumes no obligation to update the forward-looking statements included in this release. This release contains forward-looking statements within the meaning of the “safe harbor” provisions of the federal securities laws, including, without limitation, statements by Don Joos, statements regarding future growth, products and distribution strategies, and statements in the “Business Outlook” section regarding ShoreTel’s anticipated future revenues, gross margins, operating expenses and other financial information. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. The risks and uncertainties include the intense competition in our industry, our reliance on third parties to sell and support our products, our ability to continue to grow our ShoreTel Sky business, market acceptance of cloud-based products, our ability to grow or maintain our premise business, supply and manufacturing risks, our ability to control costs as we expand our business, our ability to attract, retain and ramp new personnel, potentially longer sales cycles, uncertainties inherent in the product development cycle, ability of third parties to successfully market and sell our products, uncertainty as to market acceptance of new products and services, the potential for litigation in our industry, the uncertain impact of global economic conditions, including impact on customers’ purchasing decisions, and other risk factors set forth in ShoreTel’s Form 10-K for the year ended 30 June 2013, and in its Form 10-Q for the quarter ended 31 December 2013.
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About ShoreTel
ShoreTel, Inc. (NASDAQ: SHOR) is a leading provider of brilliantly simple IP phone systems and unified communications solutions. Its award-winning on-premises IP-PBX solution and cloud-based hosted phone system eliminate complexity and improve productivity. Recognized for its industry-leading customer experience and support, ShoreTel’s innovative business phones, application integration, collaboration tools, mobility, and contact center applications enable users to communicate and collaborate no matter the time, place or device, with minimal demand on IT resources. ShoreTel is headquartered in Sunnyvale, Calif., and has regional offices and partners worldwide. For more information, visit www.shoretel.com.
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ShoreTel, ShoreTel Sky and the ShoreTel logo are trademarks or registered trademarks of ShoreTel, Inc. in the United States and/or other countries. All other trademarks, trade names and service marks herein are the property of their respective owners. Salesforce and others are trademarks of salesforce.com, inc. and are used here with permission.
Media contact:
Joy Francisco
Asia-Pacific Connections for ShoreTel
joy@apconnections.com
+65 6334 9045