MITL

Mitel Networks Corporation (MITL)

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Mitel Networks (MITL)

Q4 2013 Earnings Call

June 24, 2013 5:00 pm ET

Executives

Cynthia Hiponia - Managing Director

Richard D. McBee - Chief Executive Officer, President, Chief Operating Officer and Director

Steven E. Spooner - Chief Financial Officer and Principal Accounting Officer

Analysts

Ron Shuttleworth - M Partners Inc., Research Division

Paul Treiber - RBC Capital Markets, LLC, Research Division

Richard Tse - Cormark Securities Inc., Research Division

Prabh Gowrisankaran

Presentation

Operator

Good day, and welcome to the Mitel Networks Fourth Quarter Fiscal Earnings Conference Call. As a reminder, today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Cynthia Hiponia. Please go ahead, Ms. Hiponia.

Cynthia Hiponia

Thanks, Luna. This is Cynthia Hiponia, Mitel Investor Relations, and I'm pleased to welcome you to Mitel Networks Fourth Quarter and Full Year Fiscal 2013 Earnings Results Conference Call.

At 4:05 Eastern Time, Mitel published its earnings release through the GlobeNewswire. The release is also available on Mitel's Investor Relations website at mitel.com. A replay of the conference call will be available through Saturday, June 29. To access the replay, please dial (888) 203-1112 and enter passcode 2171897. Callers outside the U.S. and Canada should dial (647) 436-0148 and enter passcode 2171897. The webcast will also be all archived on Mitel's IR website for 3 months.

Some of the statements made in this presentation, including the information regarding our financial performance targets for the first quarter of fiscal 2014, will be forward-looking statements within the meaning of applicable U.S. and Canadian securities laws. This presentation includes forward-looking statements pertaining to, among other matters, our future global economic performance; profitability and financial condition; general global economic conditions; our business strategy, plans and objectives for future operations; our industry and the growth in the markets in which we compete; the cost of operating as a public company; and our ability to implement and achieve our business strategies successfully. These forward-looking statements reflect currently available information or our current views with respect to future events, and are based on assumptions and risks -- and subject to risks and uncertainties.

In making these statements, we have made assumptions regarding, among other things, no unforeseen changes occurring in the competitive landscape that would affect our industry generally or Mitel in particular, a stable or recovering economic environment, no significant event occurring outside the ordinary course of our business and stable foreign exchange and interest rates. Actual events or Mitel's results, performance, financial position or achievements could differ materially from those contemplated, expressed or implied by such forward-looking statements as a result of the various risk factors and uncertainties, including the risk factors described under the heading Risk Factors in Mitel's annual report on Form 10-K, which has been filed with the U.S. Securities and Exchange Commission on June 24, 2013, and filed with Canadian securities authorities. Except as required by law, Mitel is under no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

Let me now turn the call over to Mitel's President and CEO, Richard McBee.

Richard D. McBee

Thank you, Cynthia. With me this afternoon is Steve Spooner, Mitel's Chief Financial Officer. Steve and I are joining you today from Hollywood, Florida, where, this week, we'll be hosting more than 1,000 people, including channel partners, customers, communication consultants and industry analysts at our annual Mitel Business Partner Conference.

I'm pleased to report revenue of $150.9 million in the fourth quarter, with Mitel posting solid sequential growth of 6%. In addition, we had healthy gross margins in the quarter of 56.1% and EBITDA margins of 16.9%. In the quarter, we paid down $28 million in debt and achieved record sales of our Mitel AnyWare cloud services.

In FY '13, our recurring revenue grew and now comprises more than 26% of our total revenues. I would like to thank all the Mitel employees who rallied back after a rough start this past year and consistently improved results quarter-over-quarter, ultimately delivering the strong results we experienced in the fourth quarter. Our continued focus on our 3+1 Strategy to simplify the business, keep our portfolio focused, improve our channels and exploit our leadership of virtualization, created a focused discipline for Mitel and it remains a core operating principle of our business.

As we entered fiscal 2014, we began implementing the strategy to put together a singular focus on delivering profitable growth. This strategy leverages the strength of our traditional premise-based business, where we are positioned to provide ongoing sales and services to a large and growing worldwide installed base, while also focusing on growth in the cloud market. Mitel serves the fastest growing cloud market in 3 ways: as a retail cloud provider with Mitel AnyWare, through a wholesale offering that enables others to provide cloud services, and through the deployment of private cloud to larger enterprises who basically host their own cloud.

Mitel's competitive advantage is the ability to seamlessly move between premise and cloud on a single product platform versus the competitors, who may address both markets but do so with disjointed solutions. We have defined 3 strategic objectives to address both markets simultaneously, and I'm happy to report we have are already made significant progress in each area.

The first strategic objective is to leverage the strength of Mitel's core IP telephony and UC products. To drive towards this objective, we conducted an exhaustive study to understand customer buying trends, to improve our sales processes and to create a consistent customer engagement experience. To lead these efforts, we announced the appointment of Joe Vitalone as EVP of Sales in the Americas, which includes North Americas, the Caribbean and Latin America. Joe joined us from ShoreTel, where he was VP of Channel Management.

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