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ShoreTel Reports Financial Results for First Quarter Fiscal Year 2015
Achieved Record Total Revenue
SUNNYVALE, Calif., Oct. 23, 2014 /PRNewswire/ -- ShoreTel� (NASDAQ: SHOR), the leading provider of brilliantly simple phone systems and unified communications solutions, today announced financial results for the first quarter of fiscal 2015, which ended September 30, 2014.
For the first quarter of fiscal 2015, total revenue was a record $90.4 million, an increase of 7 percent compared to the first quarter of fiscal 2014. Non-GAAP net income, which excludes stock-based compensation charges, amortization of acquisition-related intangibles, other charges and related tax adjustments, for the first quarter of fiscal year 2015, was a $4.7 million, or $0.07 per diluted share. This compares with a non-GAAP net income of $4.0 million, or $0.07 per diluted share, in the first quarter of fiscal 2014. GAAP net income was $0.4 million, or $0.01 per diluted share, in the first quarter of fiscal 2015, compared with a GAAP net loss of $1.0 million, or $0.02 per share, in the first quarter of fiscal 2014. "Our record first quarter results highlight the continued successful execution of our three strategic priorities which are to drive growth, to expand our technology and infrastructure capacity, and to continue to earn a world-class reputation for customer satisfaction," said Don Joos, president and CEO of ShoreTel. "Importantly, our growth initiatives, enhanced by our strong sales execution, continue to evolve and we are on track to deliver our next generation common platform in April, faster than originally anticipated. We have also increased our financial flexibility with the signing of our new $100 million line of credit facility. We are pleased with our team's strong execution and continued progress against our stated strategic goals."
First Quarter of Fiscal 2015 Financial Highlights
Recurring revenues, which consist of cloud monthly recurring revenues and support revenues, represented 39 percent of total revenue in the first quarter of fiscal 2015 and reached an annualized value of $142 million; an increase of 17 percent compared to the first quarter of fiscal 2014. Non-GAAP total gross margin, which excludes stock-based compensation charges and amortization of acquisition-related intangibles, for the first quarter of fiscal year 2015, was 61.3 percent, compared with 62.3 percent in the year-ago period. GAAP gross margin for the first quarter of fiscal year 2015 was 59.5 percent, compared with 60.7 percent in the first quarter of fiscal year 2014.
Hosted revenues of $24.9 million were up 20 percent year-over-year and 3.5 percent sequentially. Non-GAAP hosted gross margin was 42.1 percent in the first quarter of fiscal 2015, compared with 43.4 percent in the first quarter of fiscal 2014. GAAP hosted gross margin for the first quarter of fiscal year 2015 was 37.4 percent, compared with 39.6 percent in the first quarter of fiscal year 2014. The total number of installed customer seats increased 27 percent over the first quarter of fiscal 2014 to approximately 160,500. Revenue churn dropped to approximately 2 percent annualized in the first quarter of fiscal 2015.
Product revenues of $47.7 million were up slightly year-over-year, and up one percent sequentially. Non-GAAP product gross margin was 65.5 percent in the first quarter of fiscal 2015, compared with 66.4 percent in the first quarter of fiscal 2014. GAAP product gross margin for the first quarter of fiscal year 2015 was 64.8 percent, compared with 65.8 percent in the first quarter of fiscal year 2014.
Support and services revenues of $17.8 million were up 12 percent year-over-year and 3 percent sequentially. Non-GAAP support and service gross margin was 77.0 percent in the first quarter of fiscal 2015, compared with 74.6 percent in the first quarter of fiscal 2014. GAAP support and service gross margin for the first quarter of fiscal year 2015 was 76.0 percent, compared with 73.0 percent in the first quarter of fiscal year 2014. As of September 30, 2014 the company had $62.7 million in cash, cash equivalents and short-term investments and no outstanding debt.
First Quarter of Fiscal 2015 Business Highlights
Nemertes Research Finds ShoreTel Has Lowest First-Year IP Telephony Costs
A recent study by Nemertes Research found that ShoreTel delivers the lowest first-year total cost of ownership ("TCO") across all size deployments against six competitors. The study included nearly 200 organizations and gathered real-world cost data for seven leading IP telephony and unified communications vendors. The responses were used to develop a first-year TCO analysis of on-premises, cloud and hybrid deployments.
The industry research shows ShoreTel ranks the lowest in first-year telephony costs (for both up-front and ongoing investments) for all-sized company deployments. Nemertes also considered the size and complexity of the roll-out in the report. For installations greater than 350 endpoints, ShoreTel's first-year overall costs are the lowest per endpoint. The report also found ShoreTel systems require lower staffing levels than other vendors.
ShoreTel Increases Line of Credit Availability to $100M
The Company entered into a new line of credit facility which increases its borrowing capacity from $50 million to $100 million and will be available until October 2019. The line of credit provides the company increased flexibility to pursue growth initiatives, make internal investments and pursue strategic opportunities.
ShoreTel Delivers Mobile Video Collaboration with ShoreTel Mobility 8
In August, ShoreTel launched a major update to ShoreTel Mobility, version 8, for on-premises customers. ShoreTel Mobility 8 empowers everyone with simple, seamless mobile-enabled video conferencing to ensure employees can always stay connected with their colleagues wherever they may be working. ShoreTel Mobility 8 makes it easy to communicate via video between iOS and AndroidTM smartphones and tablets using the ShoreTel Mobility Client, with single touch video calling from the keypad. Users can participate in multi-party video sessions from mobile devices to room-based video communication systems.
Mobility 8 has seamless integration with ShoreTel Communicator, enabling employees to fully control their ShoreTel Mobility client using the same easy-to-use, intuitive ShoreTel Communicator interface they use to manage their desk phone.
ShoreTel Mobility 8 also introduced a virtualized ShoreTel Mobility Router so IT departments can easily mobile-enable the company workforce to encourage collaboration and productivity. This option lowers costs for hardware and IT staff and improves overall TCO for deployments.
ShoreTel Names Frederic Gillant as Managing Director for Asia Pacific
ShoreTel appointed Frederic Gillant as vice president and managing director for Asia Pacific reporting directly to ShoreTel's senior vice president of worldwide sales, David Petts. His appointment reflects ShoreTel's continued investment in the Asia Pacific region, which is a key part of the company's global growth strategy. Gillant is based in Singapore and is responsible for leading ShoreTel's go-to-market strategy across the Asia Pacific region including oversight of the regional sales teams serving Australia, New Zealand, Asia and South Africa.
ShoreTel Opens Sales, Service and R & D Office in Bangalore, India
As part of ShoreTel's Asia Pacific expansion, ShoreTel India was recently opened to provide sales, global support services, and research and development expertise. The company is leveraging India's world-class technical talent in Bangalore to further the development and support of existing and next-generation ShoreTel products and solutions. ShoreTel plans to continue to grow its Bangalore office over time. The engineering, sales and support teams will be working closely with their counterparts around the world, to enable ShoreTel to continue to provide innovative solutions that meet the needs of customers worldwide.
ShoreTel Named to Inaugural CRN Cloud Partner Program Guide
ShoreTel was pleased to be named to the inaugural CRN Cloud Partner Program Guide, a listing of the leading technology vendors with cloud-related partner programs. This guide offers solution providers a valuable resource for locating the IT industry's top cloud technologies and programs and a way to connect with the organizations making these cloud technologies and partner programs available specifically through the IT channel. Earlier this year, ShoreTel expanded its innovative Champion Partner Program with a focus on cloud communications, and already more than 300 of its U.S. partners are selling cloud services. ShoreTel offers its channel partners a simple, customizable and lucrative program for growing and differentiating their cloud communications businesses, enabling partners to accommodate the growing demand by end-users for cloud services. The program has three tiers - Enabled, Approved and Referral - each relating to different levels of expertise, volume commitments and compensation options.
ShoreTel is providing the following outlook for its fiscal second quarter of 2015 ending December 31, 2014:
- Total revenue is expected to be in the range of $85.0 million to $91.0 million.
- Non-GAAP gross margin, which excludes approximately two percent in stock-based compensation charges, amortization of acquisition-related intangibles and other charges, is expected to be in the range of 60.5 percent to 61.5 percent. GAAP total gross margin is expected to be in the range of 58.5 percent to 59.5 percent.
- Non-GAAP operating expenses, which exclude approximately $2.5 million in stock-based compensation expenses, amortization of acquisition-related intangibles and other charges, are expected to be in the range of $49.5 million to $50.5 million. GAAP total operating expenses are expected to be in the range of $52.0 million to $53.0 million.
Conference Call Information
The Company will host a corresponding conference call and live webcast at 2:00 p.m. Pacific Time on Thursday, October 23, 2014. To access the conference call, dial + 1-866-652-5200 for callers in the U.S. or + 1-412-317-6060 for international callers and ask to join the ShoreTel call. A live webcast will be available in the Investor Relations section of the Company's corporate website at http://ir.shoretel.com/ and an archived recording will be available beginning approximately two hours after the completion of the call. An audio telephonic replay of the conference call will also be available beginning approximately one hour after the completion of the call until November 4, 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 10054412.
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 amortization 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, and statements regarding market demand, product and technology introductions and benefits and uses of the loan facility and statements in the "Business Outlook" section regarding ShoreTel's anticipated future revenues, gross margins, operating expenses (on a GAAP and non-GAAP basis) 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 cloud-based solutions, our ability to grow or maintain our premise products, supply and manufacturing risks, the impact of outages or security breaches, uncertainties related to international operations, 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, our ability to identify and execute on strategic opportunities, unknown impact of the announced proposal by Mitel on purchasing decisions and on operating costs; 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 June 30, 2014.
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.
ShoreTel, ShoreTel Sky and the ShoreTel logo are trademarks or registered trademarks of ShoreTel, Inc. in the United States and/or other countries. Android is a trademark of Google Inc. All other trademarks, trade names and service marks herein are the property of their respective owners.
Director, Investor Relations
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