MITEL NETWORKS CORPORATION OTTAWA, Ontario, Nov. 2, 2017 /PRNewswire/ -- Mitel® (Nasdaq:MITL) (TSX:MNW), a global leader in business communications, today announced financial results for the third quarter ended September 30, 2017.
"Mitel delivered solid financial results in what was a very busy quarter for the company. Enterprise customers transitioning to the cloud helped push our cloud bookings up over 30% to a new record while revenues grew 24% on an as-reported basis. With the completion of the ShoreTel acquisition, we significantly accelerated our cloud strategy, moving Mitel firmly into the #2 position in the UCaaS market on a worldwide basis," said Rich McBee, Chief Executive Officer. "With the integration process well under way, we believe that the combined company is ideally positioned to leverage our global scale and strength, and market leading positions in Europe and North America to take customers to the cloud any way they want - leveraging on-site investments, a hybrid solution, or straight to the cloud."
As Reported Financial Highlights from Continuing Operations
in millions Q3 2017 Q3 2016
(except per share data)
----------------------
Historical Constant
Currency Currency(1)
-------- ----------
GAAP Revenues $241.5 $234.5 $239.1
------------- ------ ------ ------
GAAP Net Income (Loss) ($26.8) $33.8 $34.9
--------------------- ------ ----- -----
Non-GAAP Net Income(2) $20.2 $14.9 $16.0
--------------------- ----- ----- -----
GAAP EPS - basic ($0.23) $0.28 $0.29
---------------- ------ ----- -----
Non-GAAP EPS(3) $0.16 $0.12 $0.13
-------------- ----- ----- -----
Adjusted EBITDA4 $34.2 $27.3 $28.4
---------------- ----- ----- -----
1 - Constant currency is a non-GAAP
measure that adjusts Q3-2016 results
by using the same foreign currency
exchange rates as in Q3-2017. See
"Non-GAAP Financial Measurements"
below.
2 -- Non-GAAP Net Income is a non-
GAAP measure defined as Net Income
(Loss), adjusted for items as noted in
the table included in this press
release under "Reconciliation of Net
Income (Loss) to Non-GAAP Net Income
(Loss)". See "Non-GAAP Financial
Measurements" below.
3 - Non-GAAP EPS (earnings per share),
or Non-GAAP net income per common
share, is a non-GAAP measure defined
as Non-GAAP Net Income divided by
weighted average number of common
shares outstanding, fully diluted. See
the table included in this press
release under "Reconciliation of Net
Income (Loss) to Non-GAAP Net Income
(Loss)." See "Non-GAAP Financial
Measurements" below.
4 - Adjusted EBITDA is a non-GAAP
measure defined as Net Income (Loss),
adjusted for items as noted in the
table included in this press release
under "Reconciliation of Net Income
(Loss) to Adjusted EBITDA". See "Non-
GAAP Financial Measurements" below.
"Cost reduction actions initiated earlier in the year enabled us to close the September quarter with a strong liquidity position," commented Steve Spooner, Chief Financial Officer. "In conjunction with the closing of the ShoreTel acquisition, we put in place a debt structure that enables Mitel to maintain the flexibility we need to run the business and execute on our long-term growth strategy. Strong demand for our debt offering enabled us to obtain excellent terms, which exceeded our expectations."
Business Highlights
-- Recurring cloud seats surpassed the 1,000,000 seat milestone.
-- Mitel was named as a Visionary in the 2017 Gartner Magic Quadrant for
UCaaS published in August and again ranked highest among vendors for the
hybrid UC requirement use case in the Gartner Critical Capabilities for
UCaaS published in October.
-- Mitel was selected by Dollar Tree to roll out UCaaS services for 6,000
users with total contract value of $2.4 million over 36 months.
-- Westcon-Comstor Launched Mitel Cloud Communications for Small and Medium
Enterprises in Australia
-- Mitel displaced the incumbent to win a major contract in France with
Airbus valued in excess of 7 million Euros.
Business Outlook
Mitel has set the following financial performance guidance for the quarter ending December 31, 2017.
Q4-2017 Guidance
----------------
Non-GAAP Revenues(1) $335 million to $360 million
Non-GAAP Gross Margin %(1) 56.5% to 58.5%
Adjusted EBITDA %(2) 14.0% to 18.0%
Non-GAAP Net Income(2) 8.0% to 11.0%
Diluted Share count 123,500,000
1 - Non-GAAP Revenues and Non-GAAP
Gross Margins exclude purchase
accounting adjustments.
Reconciliations between Non-GAAP
Revenues and Non-GAAP Gross Margin %
and the most comparable financial
measures calculated in accordance with
GAAP have not been provided because
such reconciliations are not available
without unreasonable efforts. More
specifically, purchase accounting
adjustments are not available without
unreasonable efforts due to their high
variability, complexity and low
visibility due to the recent nature of
the ShoreTel acquisition. We expect
the adjustments to have a significant,
and potentially unpredictable, impact
on our future GAAP financial results.
2 - A reconciliation between the
Business Outlook for Q4-2017 on a
GAAP and non-GAAP basis is provided
in the table entitled "Reconciliation
of Guidance-Non-GAAP Net Income and
Adjusted EBITDA to GAAP Net Income
(Loss), before income taxes" located
in the tables at the end of this
release.
Conference Call Information
Mitel will host an investor conference call and live webcast on Thursday, November 2, 2017 at 8:30 a.m. ET (5:30 a.m. PT) to discuss its financial results for the third quarter ended September 30, 2017. To access the conference call, dial 888-734-0328. Callers outside the U.S. and Canada should dial 678-894-3054. The live webcast will be accessible on Mitel's investor relations website at www.mitel.com. It will be archived and available on this site for replay on or about Thursday, November 2, 2017 after 12:00 p.m. ET. We have also provided a slide deck to help illustrate our financial results. It has been posted on www.mitel.com. Our Form 10-Q is expected to be filed with the SEC on or before November 2, 2017 and will include our complete financial results for the quarter ended September 30, 2017.
Non-GAAP Financial Measurements
This press release includes references to non-GAAP financial measures including non-GAAP revenue, non-GAAP gross margins, Adjusted EBITDA, non-GAAP net income, non-GAAP EPS (earnings per share) or non-GAAP net income per common share and Constant Currency. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. We use these non-GAAP financial measures to assist management and investors in understanding our past financial performance and prospects for the future, including changes in our operating results, trends and marketplace performance, exclusive of unusual events and other factors which do not directly affect what we consider to be our core operating performance. Non-GAAP measures are among the primary indicators management uses as a basis for our planning and forecasting of future periods. Investors are cautioned that non-GAAP financial measures should not be relied upon as a substitute for financial measures prepared in accordance with U.S. generally accepted accounting principles. Please see the reconciliations of non-GAAP financial measures to the most directly comparable U.S. GAAP measure attached to this release.
Forward Looking Statements
Some of the statements in this communication are forward-looking statements (or forward-looking information) within the meaning of applicable U.S. and Canadian securities laws. These include statements using the words believe, target, outlook, may, will, should, could, estimate, continue, expect, intend, plan, predict, potential, project and anticipate, and similar statements which do not describe the present or provide information about the past. There is no guarantee that the expected events or expected results will actually occur. Such statements reflect the current views of management of Mitel and are subject to a number of risks and uncertainties. These statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, operational and other factors. Any changes in these assumptions or other factors could cause actual results to differ materially from current expectations. All forward-looking statements attributable to Mitel, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements set forth in this paragraph. Undue reliance should not be placed on such statements. In addition, material risks that could cause actual results to differ from forward-looking statements include: the inherent uncertainty associated with financial or other projections; the integration of Mitel and ShoreTel and the ability to recognize the anticipated benefits from the acquisition of ShoreTel; the anticipated size of the markets and continued demand for Mitel and ShoreTel products and services; the impact of competitive products and pricing and disruption to the combined business that could result from the acquisition of ShoreTel; access to available financing on a timely basis and on reasonable terms; risks associated with the non-cash consideration received by Mitel in connection with the divestment of Mitel's mobile division; Mitel's ability to achieve or sustain profitability in the future; fluctuations in quarterly and annual revenues and operating results; fluctuations in foreign exchange rates; current and ongoing global economic instability, political unrest and related sanctions; intense competition; reliance on channel partners for a significant component of sales; dependence upon a small number of outside contract manufacturers to manufacture products; and, Mitel's ability to successfully implement and achieve its business strategies, including its growth of the company through acquisitions and the integration of recently acquired businesses and realization of synergies, including the acquisition of ShoreTel. Additional risks are described under the heading "Risk Factors" in Mitel's Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC and Canadian securities regulatory authorities on March 1, 2017 and in Mitel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 to be filed with the SEC and Canadian securities regulatory authorities. Forward-looking statements speak only as of the date they are made. Except as required by law, Mitel has no intention or obligation to update or to publicly announce the results of any revisions to any of the forward-looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements.
About Mitel
A global market leader in business communications powering more than two billion business connections, Mitel (Nasdaq:MITL) (TSX:MNW) helps businesses and service providers connect, collaborate and provide innovative services to their customers. Our innovation and communications experts serve more than 70 million business users in more than 100 countries. For more information, go to www.mitel.com and follow us on Twitter @Mitel.
Mitel is the registered trademark of Mitel Networks Corporation.
All other trademarks are the property of their respective owners.
MITL-F
Contact Information
Media and Industry Analysts
Amy MacLeod
613-691-3317
amy.macleod@mitel.com
Investors
Michael McCarthy
469-574-8134
michael.mccarthy@mitel.com
CY16 CY16 CY17 CY17 CY17
Q3 Q4 Q1 Q2 Q3
Total Cloud Seats 2,654,978 3,090,361 3,263,255 3,439,959 3,877,805
Recurring Cloud Seats 494,302 543,725 588,460 665,616 1,025,106
--------------------- ------- ------- ------- ------- ---------
MITEL NETWORKS CORPORATION
SUMMARY CONSOLIDATED BALANCE SHEETS
(in millions of US dollars)
(unaudited)
September 30, December 31,
2017 2016
---- ----
ASSETS
Current assets:
Cash and cash equivalents $55.4 $97.3
Accounts receivable 216.4 186.3
Sales-type lease receivables 4.5 5.8
Inventories 106.9 74.9
Other current assets 81.6 57.7
Assets of component held for sale, current - 121.3
464.8 543.3
Non-current portion of sales-type lease receivables 4.9 6.7
Deferred tax asset 131.5 185.2
Property and equipment 54.7 39.1
Identifiable intangible assets 410.8 100.4
Goodwill 549.0 346.3
Other non-current assets 30.7 7.9
Assets of component held for sale, non-current - 332.5
$1,646.4 $1,561.4
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $292.5 $200.6
Current portion of deferred revenue 154.9 88.0
Current portion of long-term debt 16.5 38.9
Liabilities of component held for sale, current - 58.3
--- ----
463.9 385.8
Long-term debt 615.8 547.1
Long-term portion of deferred revenue 59.1 39.4
Deferred tax liability 10.3 10.0
Pension liability 148.7 145.5
Other non-current liabilities 30.5 25.9
Liabilities of component held for sale, non-current - 24.8
--- ----
1,328.3 1,178.5
Shareholders' equity 318.1 382.9
----- -----
$1,646.4 $1,561.4
======== ========
MITEL NETWORKS CORPORATION
SUMMARY STATEMENT OF OPERATIONS INFORMATION
(in millions of US dollars)
(unaudited)
Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
(US GAAP, except as (US GAAP, except as (US GAAP, except as (US GAAP, except as
indicated otherwise) indicated otherwise) indicated otherwise) indicated otherwise)
------------------- ------------------- ------------------- -------------------
Revenues $241.5 $234.5 $703.2 $727.8
Cost of revenues 108.5 109.8 321.6 336.1
----- ----- ----- -----
Gross Margin 133.0 124.7 381.6 391.7
----- ----- ----- -----
Expenses (income):
Selling, general and administrative 84.0 82.9 255.0 255.6
Research and development 22.5 23.0 67.8 74.7
Special charges and restructuring
costs 35.7 20.8 56.4 57.8
Amortization of acquisition-
related intangible assets 8.5 9.5 25.7 26.3
Income from termination fee
received - (60.0) - (60.0)
150.7 76.2 404.9 354.4
----- ---- ----- -----
Operating income (loss) (17.7) 48.5 (23.3) 37.3
Interest expense (3.3) (3.9) (9.0) (12.7)
Debt retirement and other
debt costs - (0.4) (18.0) (2.1)
Other income (expense) (1.1) 1.3 (1.0) 2.0
---- --- ---- ---
Income (loss) from continuing
operations, before income
taxes (22.1) 45.5 (51.3) 24.5
Current income tax recovery
(expense) 1.9 1.2 (1.5) (2.0)
Deferred income tax recovery
(expense) (6.6) (12.9) 6.2 (1.4)
---- ----- --- ----
Net income (loss) from
continuing operations (26.8) 33.8 (46.6) 21.1
Net loss from discontinued
operations - (8.7) (1.4) (29.2)
--- ---- ---- -----
Net income (loss) $(26.8) $25.1 $(48.0) $(8.1)
====== ===== ====== =====
Non-GAAP measures:
------------------
Adjusted EBITDA from
continuing operations $34.2 $27.3 $84.2 $86.9
Adjusted EBITDA from
discontinued operations $ - $7.2 $(12.2) $19.1
Adjusted EBITDA $34.2 $34.5 $72.0 $106.0
Non-GAAP net income from
continuing operations $20.2 $14.9 $48.0 $47.6
Non-GAAP net income from
discontinued operations $ - $0.1 $(12.7) $(1.5)
Non-GAAP net income $20.2 $15.0 $35.3 $46.1
MITEL NETWORKS CORPORATION
Cash flow information
(in millions of US dollars)
(unaudited)
Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
------------------ ------------------ ------------------ ------------------
Cash provided by (used
in):
Net cash provided by
(used in) operating
activities $27.9 $29.7 $29.6 $62.5
Net cash provided by
(used in) investing
activities (405.5) (4.6) (77.1) (11.9)
Net cash provided by
(used in) financing
activities 380.9 (12.9) (3.5) (67.8)
Effect of exchange rate
changes on cash balances 1.3 (0.1) 5.6 (1.1)
Net increase (decrease)
in cash and cash
equivalents 4.6 12.1 (45.4) (18.3)
Cash and cash
equivalents, beginning
of period 50.8 61.2 100.8 91.6
Cash and cash
equivalents, end of
period $55.4 $73.3 $55.4 $73.3
===== ===== ===== =====
MITEL NETWORKS CORPORATION
Revenue and Gross Margin
(in millions of US dollars)
(unaudited)
Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
------------------ ------------------ ------------------ ------------------
Revenues
Enterprise - Product $142.8 $141.4 $421.7 $438.3
Enterprise - Services 62.7 64.1 183.6 204.2
Cloud - Recurring 36.0 29.0 97.9 85.3
---- ---- ---- ----
Total revenues $241.5 $234.5 $703.2 $727.8
====== ====== ====== ======
Gross margin
Enterprise - Product $81.9 $80.2 $236.8 $253.3
Enterprise - Services 33.0 29.7 95.6 96.0
Cloud - Recurring 18.1 14.8 49.2 42.4
---- ---- ---- ----
Total gross margin $133.0 $124.7 $381.6 $391.7
====== ====== ====== ======
MITEL NETWORKS CORPORATION
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(in millions of US dollars)
(unaudited)
Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
------------------ ------------------ ------------------ ------------------
Net income (loss) $(26.8) $25.1 $(48.0) $(8.1)
Net loss from discontinued operations - 8.7 1.4 29.2
Net income (loss) from continuing
operations (26.8) 33.8 (46.6) 21.1
Adjustments:
Interest expense 3.3 3.9 9.0 12.7
Income tax expense (recovery) 4.7 11.7 (4.7) 3.4
Amortization and depreciation 13.2 14.3 39.1 41.1
Foreign exchange loss (gain) 1.3 (1.1) 2.9 (1.5)
Special charges and restructuring
costs 35.7 20.8 56.4 57.8
Stock-based compensation 3.1 3.5 10.8 10.2
Debt retirement and other debt costs - 0.4 18.0 2.1
Income from termination fee received
and other (0.3) (60.0) (0.7) (60.0)
---- ----- ---- -----
Adjusted EBITDA from continuing
operations 34.2 27.3 84.2 86.9
Adjusted EBITDA from discontinued
operations(1) - 7.2 (12.2) 19.1
--- --- ----- ----
Adjusted EBITDA $34.2 $34.5 $72.0 $106.0
===== ===== ===== ======
(1) The
reconciliation
of net loss
from
discontinued
operations to
Adjusted
EBITDA from
discontinued
operations
for the three
months ended
September 30,
2016 consists
of interest
expense of
$5.5 million,
income tax
recovery of
$3.8 million,
amortization
and
depreciation
of $11.7
million,
special
charges and
restructuring
costs of $1.7
million and
stock-based
compensation
of $0.8
million. The
reconciliation
of net loss
from
discontinued
operations to
Adjusted
EBITDA from
discontinued
operations
for the nine
months ended
September 30,
2016 consists
of interest
expense of
$16.5
million,
income tax
recovery of
$12.2
million,
amortization
and
depreciation
of $34.7
million,
special
charges and
restructuring
costs of $5.8
million,
stock-based
compensation
of $2.3
million and
purchase
accounting
adjustments
of $1.2
million. The
reconciliation
of net loss
from
discontinued
operations to
Adjusted
EBITDA from
discontinued
operations
for the nine
months ended
September 30,
2017 consists
of interest
expense of
$3.7 million,
income tax
recovery of
$6.6 million
and a gain on
disposal of
$7.9 million.
MITEL NETWORKS CORPORATION
Reconciliation of Net Income (Loss) to Non-GAAP Net Income (Loss)
(in millions of US dollars, except per share amounts)
(unaudited)
Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
------------------ ------------------ ------------------ ------------------
Net income (loss) $(26.8) $25.1 $(48.0) $(8.1)
Net loss from discontinued
operations - 8.7 1.4 29.2
--- --- --- ----
Net income (loss) from
continuing operations (26.8) 33.8 (46.6) 21.1
Income tax expense (recovery) 4.7 11.7 (4.7) 3.4
--- ---- ---- ---
Net income (loss) from
continuing operations, before
income taxes (22.1) 45.5 (51.3) 24.5
Adjustments:
Foreign exchange loss (gain) 1.3 (1.1) 2.9 (1.5)
Special charges and
restructuring costs 35.7 20.8 56.4 57.8
Stock-based compensation 3.1 3.5 10.8 10.2
Amortization of acquisition-
related intangibles assets 8.5 9.5 25.7 26.3
Debt retirement and other debt
costs - 0.4 18.0 2.1
Income from termination fee
received and other (0.3) (60.0) (0.7) (60.0)
Non-GAAP net income from
continuing operations, before
income taxes 26.2 18.6 61.8 59.4
Non-GAAP tax expense(1) (6.0) (3.7) (13.8) (11.8)
---- ---- ----- -----
Non-GAAP net income from
continuing operations 20.2 14.9 48.0 47.6
Non-GAAP net income (loss)
from discontinued
operations(2) - 0.1 (12.7) (1.5)
--- --- ----- ----
Non-GAAP net income $20.2 $15.0 $35.3 $46.1
===== ===== ===== =====
Non-GAAP net income (loss) per
share, diluted:
Non-GAAP net income per common
share, continuing operations $0.16 $0.12 $0.38 $0.38
Non-GAAP net income (loss) per
common share, discontinued
operations $ - $ - $(0.10) $(0.01)
Non-GAAP net income per common
share $0.16 $0.12 $0.28 $0.37
Weighted-average number of
common shares outstanding,
fully diluted (in millions): 122.8 125.9 124.7 125.5
(1) Non-GAAP tax
expense is
based on an
effective tax
rate of 23%
for the
quarter ended
September 30,
2017 and
approximately
20% for all
prior
periods.
(2) The
reconciliation
of net loss
from
discontinued
operations to
Non-GAAP net
income from
discontinued
operations
for the
quarter ended
September 30,
2016 consists
of
amortization
of
acquisition-
related
intangible
assets of
$10.1
million,
special
charges and
restructuring
costs of $1.7
million,
stock-based
compensation
of $0.8
million and
income tax
recovery of
$3.8 million.
The
reconciliation
of net loss
from
discontinued
operations to
Non-GAAP net
loss from
discontinued
operations
for the Nine
Months ended
September 30,
2017 consists
of
amortization
of
acquisition-
related
intangible
assets of
$nil, special
charges and
restructuring
costs of
$nil, stock-
based
compensation
of $nil,
income tax
recovery of
$3.4 million
and a gain on
the sale of
the business
of $7.9
million.
The
reconciliation
of net loss
from
discontinued
operations to
Non-GAAP net
loss from
discontinued
operations
for the Nine
Months ended
September 30,
2016 consists
of
amortization
of
acquisition-
related
intangible
assets of
$30.3
million,
special
charges and
restructuring
costs of $5.8
million,
stock-based
compensation
of $2.3
million,
income tax
recovery of
$11.9 million
and purchase
accounting
adjustments
of $1.2
million.
MITEL NETWORKS CORPORATION
Reconciliation of Guidance
Non-GAAP Net Income and Adjusted EBITDA to GAAP Net Income (Loss), before income taxes
(in millions of US dollars)
(unaudited)
As a percentage of
Non-GAAP Revenue
----------------
Non-GAAP net income 8.0% - 11.0%
Non-GAAP tax expense(1) (3.0%) - (2.0%)
--------------
Non-GAAP net income, before income taxes 10.0% - 14.0%
Adjustments(2):
Special charges and restructuring costs(3) 10.0% - 11.0%
Stock-based compensation 1.0%
Amortization of acquisition-related intangibles assets 6.5% - 7.0%
Net income (loss), before income taxes(4) (9.0%) - (3.5%)
==============
Adjusted EBITDA 14.0% - 18.0%
Adjustments(2):
Interest expense 3.0%
Amortization and depreciation 7.5% - 8.0%
Special charges and restructuring costs(3) 10.0% - 11.0%
Stock-based compensation 1.0%
Net income (loss), before income taxes(4) (9.0%) - (3.5%)
==============
(1) Non-GAAP tax expense is based on an estimated
effective tax rate of 23%.
(2) Adjustments for foreign exchange, purchase
accounting adjustments and debt retirement costs
are not available without unreasonable efforts
and are excluded from the reconciliation due to
the high variability, complexity and low
visibility. We expect the adjustments to have a
significant, and potentially unpredictable,
impact on our future GAAP financial results.
(3) The amount and timing of special charges and
restructuring costs depend on several factors,
including future revenue levels, opportunities
for operating efficiencies, and the size and
timing of acquisition activities. As a result,
we expect the charges to have a significant, and
potentially unpredictable, impact on our future
GAAP financial results.
(4) The guidance reconciliations above reconcile
to GAAP net income (loss), before income taxes,
as opposed to GAAP net income (loss), because
income tax expense (recovery) guidance is not
available without unreasonable efforts due to the
high variability, complexity and low visibility
of the Company's quarterly income tax provision.
We expect income tax expense (recovery) to have a
significant, and potentially unpredictable,
impact on our future GAAP financial results.
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SOURCE Mitel
