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Altigen Communications, Inc. Reports Third Quarter and Nine Months 2018 Financial Results

SAN JOSE, CA / ACCESSWIRE / July 25, 2018 / Altigen Communications, Inc. (OTCQB: ATGN ), a Silicon Valley based provider of Hosted Skype for Business and Contact Center solutions, announced today its financial results for the third quarter ended June 30, 2018.

Third Quarter Financial Highlights

  • Revenue was $2.6 million, a 21% increase over the prior year third quarter
  • GAAP net income was $92,000
  • Non-GAAP net income was $441,000

Nine Months Financial Highlights

  • Revenue was $7.3 million, a 17% increase over the prior year
  • GAAP net income was $813,000
  • Non-GAAP net income was $1.2 million
  • Working capital increased 41% to $2.2 million

Third Quarter 2018 Financial Results

Revenue for the third quarter of fiscal 2018 was $2.6 million, compared to $2.5 million in the preceding quarter, and compared to $2.1 million in the prior year quarter, representing an increase of 4% and 21%, respectively. Gross margin in the third quarter of fiscal 2018 was 83.9%, compared to 84.3% in the preceding quarter, and compared to 84.9% during the third quarter of fiscal 2017.

GAAP net income for the third quarter of fiscal 2018 was $92,000, or $0.00 per diluted share, compared with net income of $383,000, or $0.02 per diluted share in the preceding quarter, and compared to net income of $98,000, or $0.00 per diluted share during the same period a year ago.

Non-GAAP net income for the third quarter of fiscal 2018 was $441,000, or $0.02 per diluted share, compared with non-GAAP net income of $390,000, or $0.02 per diluted share in the preceding quarter, and compared to a non-GAAP net income of $147,000, or $0.01 per diluted share in the same period of the prior year.

GAAP operating expenses totaled $2.0 million for the third quarter of fiscal 2018, compared with $1.7 million at the end of the second quarter of fiscal 2018, and compared with $1.7 million during the third quarter of fiscal 2017. Non-GAAP operating expenses for the third quarter of fiscal 2018 totaled $1.7 million, the same as in the preceding quarter, and $1.6 million in the comparable period last year.

The increase in GAAP operating expenses, as well as the decrease in GAAP net income for the third quarter of fiscal 2018, compared to the preceding quarter, was primarily attributable to the estimated expense accrual arising from the below litigation.

During the third quarter of fiscal 2018, the Company recorded a litigation reserve in the amount of $342,000 in connection with a complaint filed by CTI Communications, LLC, a former reseller of the Company against the Corporation, certain members of management and executive officers, Affiliated Technology Solutions, LLC, a current reseller of the Company, James Jerome Cruz, a former CTI employee, and Thomas W. Welsh, President of Affiliated. The lawsuit was filed on March 30, 2016 in the District Court of Colorado, County of Larimer (the "Court"). On April 9, 2018, the trial Court entered a judgment that held all defendants jointly and severally liable and awarded plaintiff damages of approximately $724,000 plus attorneys' fees and costs, the amount which the Court has not yet determined. Although the Company believes it has meritorious defenses to CTI's allegations, and the Company intends to continue to vigorously defend against the allegations, the parties to this litigation have agreed to allocate damages among all defendants. Consequently, the Company determined its liability and recorded the aforementioned accrual in the Company's consolidated financial statements as of June 30, 2018. Furthermore, on April 30, 2018, the Court served our financial institution with a Writ of Garnishment restricting the Company's cash in the amount of $724,000 for the judgment and $5,000 in post-judgment interest through April 30, 2018. Such amounts have been recorded as restricted cash in the condensed consolidated balance sheet as of June 30, 2018. For additional information, please refer to the Company's filings with the OTCQB over-the-counter market, including the Company's most recent Quarterly Report filed on June 29, 2018.

On May 7, 2018, the Company filed a Motion for Stay of Execution of Judgment in the District Court of Colorado. The Company intends to appeal this verdict in the Colorado appellate court; however, no assurances can be made that the Company will be successful in its defense against these claims.

Year-to-Date Financial Results

For the nine months of fiscal year 2018, revenue grew 17% to $7.3 million, in comparison to $6.3 million during the same period in fiscal 2017. Gross margin was 83.7% for the nine months of fiscal 2018, compared to 84.9% in the same period in 2017.

GAAP net income for the nine months ended June 30, 2018 was $813,000, or $0.03 per diluted share, compared with GAAP net income of $167,000, or $0.01 per diluted share in the prior year period.

Non-GAAP net income for the nine months of fiscal year 2018 was $1.2 million, or $0.05 per diluted share, compared with non-GAAP net income of $251,000, or $0.01 per diluted share during the same period a year ago.

For the nine-month period ending June 30, 2018, GAAP operating expenses totaled $5.3 million, compared to $5.2 million during the same period of fiscal 2017, a slight increase of $164,000, or 3%. Non-GAAP operating expenses decreased 2% to $5.0 million for the nine months of fiscal 2018, compared to $5.1 million for the same period in fiscal 2017.

Cash, Cash Equivalents and Restricted Cash

Our cash, cash equivalents and restricted cash totaled $4.5 million at the end of the third quarter of fiscal 2018, compared with $4.2 million at the end of the second quarter of fiscal 2018, and compared with $3.9 million at the end of fiscal 2017, representing an increase of 7% and 16%, respectively. Working capital was $2.2 million at the end of the third quarter of fiscal 2018, compared with $2.1 million at the end of the preceding quarter, and compared with $1.5 million at the end of fiscal 2017.

As noted above, on April 30, 2018, the Company's cash was restricted in the amount of $729,000 in connection with the above litigation. The restricted cash reflects in our cash, cash equivalents and restricted cash in the condensed consolidated balance sheet as of June 30, 2018.

Non-GAAP Financial Measures

In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of our core operating performance on a period-to-period basis. The excluded items represent stock-based compensation expense and other non-recurring or unusual items that may arise from time to time that we do not consider to be directly related to core operating performance. We use non-GAAP measures to evaluate the core operating performance of our business and to perform financial planning. Since we find these measures to be useful, we believe that investors benefit from seeing results reviewed by management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by facilitating: (i) the comparability of our on-going operating results over the periods presented and (ii) the ability to identify trends in our underlying business.

The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:

Stock-based compensation expense : The Company excludes the impact of costs relating to stock-based compensation. The Company believes that the exclusion of stock-based compensation expense assists investors in the comparisons of operating results to peer companies. Stock-based compensation expense can vary significantly based on the timing, size and nature of awards granted.

Other non-recurring or unusual charges : The Company has excluded certain other expenses that are the result of other, non-comparable events to measure operating performance. These events arise outside of the ordinary course of continuing operations. Given the unique nature of the matters relating to these costs, the Company believes these items are not normal operating expenses. For example, legal settlements and judgments vary significantly, in their nature, size and frequency, and, due to this volatility, the Company believes the costs associated with legal settlements and judgments are not normal operating expenses. The Company believes that the exclusion of such out-of-the-ordinary-course amounts provides supplemental information to assist in the comparison of the financial results of the Company from period to period and, therefore, provides useful supplemental information to investors.

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation. They should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Conference Call

Altigen will be discussing its financial results and outlook on a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. ET). The conference call can be accessed by dialing (877) 407-8031 (domestic) or (201) 689-8031 (international). A live webcast will also be made available at http://www.altigen.com . To access the replay, dial (877) 481-4010 (domestic) or (919) 882-2331 (international), conference ID #34829. A web archive will be made available at www.altigen.com for 90 days following the call's conclusion.

About Altigen Communications

Altigen Communications, Inc. ( ATGN ), a leading Microsoft Cloud Solutions provider, delivers fully managed Unified Communications services, combining Hosted Skype for Business, Advanced Cloud PBX, and Innovative Cloud Contact Center applications with seamless integration to Office 365 for small-to-medium sized businesses and enterprises. Our unique and feature rich Cloud PBX and Multi-channel Contact Center solutions natively integrate with Skype for Business and Office 365 to deliver business-critical functionalities required by SMBs and enterprises. With thousands of customers around the world, Altigen solutions are designed for high reliability, ease of use, seamless integration to Microsoft infrastructure technologies, and are built on a scalable, open standards platform. Altigen's worldwide headquarters is in Silicon Valley, California. For more information, call 1-888- ALTIGEN or visit the web site at www.altigen.com .

Safe Harbor Statement

This press release contains forward‐looking information. The statements are based on reasonable assumptions, beliefs and expectations of management and the Company provides no assurance that actual events will meet management's expectations. Furthermore, the forward-looking statements contained in this press release are based on the Company's views of future events and financial performances which are subject to known and unknown risks and uncertainties, many of which are outside of the Company's control. There can be no assurances that the Company will achieve expected results, and actual results may be materially different than expectations and from those stated or implied in forward-looking statements.

Please refer to the Company's most recent Annual Report filed with the OTCQB over-the-counter market for a further discussion of risks and uncertainties. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. The Company does not undertake any obligation to update any forward-looking statements.

Contact:

Carolyn David
Vice President of Finance
Altigen Communications, Inc.
Phone: 408-597-9033
www.altigen.com


Altigen Communications, Inc.
Condensed Consolidated Statements of Operations
(Unaudited; amounts in thousands, except per share data)


Third Quarter Ended
Nine Months Ended
June 30,
June 30,
FY 2018
FY 2017
FY 2018
FY 2017
Net Revenue
$ 2,553 $ 2,108 $ 7,327 $ 6,274
Gross profit
2,142 1,791 6,134 5,330
Operating Expenses:
Research and development
733 726 2,183 2,143
Selling, general & administrative
973 963 2,793 3,011
Litigation
342 - 342 -
Operating income
94 102 816 176
Other income/(expense), net
- (2)
- (6)
Net income before provision for income taxes
94 100 816 170
Provision for income taxes
2 2 3 3
Net income
$ 92 $ 98 $ 813 $ 167
Basic and diluted net income per share
$ 0.00 $ 0.00 $ 0.03 $ 0.01
Weighted average shares outstanding - basic
22,833 22,799 22,812 22,799
Weighted average shares outstanding - diluted
25,047 23,544 24,731 23,392


Altigen Communications, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands)


June 30,
2018
(unaudited)
September 30,
2017
(audited)
Cash, cash equivalents and restricted cash
$ 4,501 $ 3,876
Accounts receivable, net
364 255
Other current assets
232 144
Net property and equipment
216 46
Other long-term assets
11 31
Total Assets
$ 5,324 $ 4,352
Current liabilities
$ 2,935 $ 2,741
Long-term liabilities
210 272
Stockholders' equity
2,179 1,339
Total liabilities and stockholders' equity
$ 5,324 $ 4,352


SOURCE: Altigen Communications