SONS

Sonus Networks, Inc. (SONS)

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Sonus Networks (SONS)

Q1 2011 Earnings Call

May 03, 2011 4:45 pm ET

Executives

Fran Murphy -

Wayne Pastore - Chief Financial Officer, Senior Vice President and Treasurer

Raymond Dolan - Chief Executive Officer, President, Director and Member of Corporate Development & Investment Committee

Analysts

Michael Sheehan

Ari Bensinger - S&P Equity Research

Catharine Trebnick - Avian Securities, LLC

Thomas Nichols

Subu Subrahmanyan - Sanders &

George Notter - Jefferies & Company, Inc.

Todd Koffman - Raymond James & Associates, Inc.

Ted Moreau - WJB Capital Group, Inc.

Presentation

Operator

Good afternoon, and thank you for standing by. Welcome to the Sonus Networks First Quarter 2011 Financial Results Conference Call. At this time, I would like to remind everyone that today's call is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fran Murphy, Vice President of Finance at Sonus, for opening remarks and introductions. Please go ahead, Mr. Murphy.

Fran Murphy

Thank you, Jason, and good afternoon, everyone. Welcome to Sonus Networks First Quarter 2011 Results Conference Call. Thank you for joining us today. With me on the call this afternoon is Ray Dolan, our Chief Executive Officer; and Wayne Pastore, our Chief Financial Officer.

Before we get started, I'd like to remind you that during this call, we will make projections or forward-looking statements regarding items such as future market opportunities and the company's financial performance. These remarks about Sonus Networks' future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

These projections or statements are neither promises nor guarantees and instead are predictions based on management's current beliefs and involve various risks and uncertainties, such that actual events or financial results may differ materially from those we have forecasted. As a result, we can make no assurances that any projections or future events or financial performance will be achieved.

For a discussion of important risks or uncertainties that could cause actual events or financial results to vary from these forward-looking statements, please refer to our recent filings with the SEC, including the risk factors described in our Form 10-K for the year ended December 31, 2010, and Form 10-Q for the quarter ended March 31, 2011.

Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update or revise forward-looking statements at some point, we specifically disclaim any obligation to do so, unless required by law.

And finally, please note that during our call, we will be referring to certain GAAP and non-GAAP financial measures. Our reconciliation of non-GAAP to comparable GAAP financial measures is available in the Investor Relations section of our website found at www.sonusnet.com. A recording of this call and the instructions for accessing it are available on the Sonus Networks Investor Relations website as well.

Before I turn the call over to Ray, let me briefly bring to your attention several of our upcoming investor events. On May 12, we will be at the Jefferies Global Technology Conference in New York, and on May 25, we will be at the Barclays Capital GMT Conference, also being held in New York. For more details on our IR outreach plan for the first half of 2011, please feel free to contact me.

I would now like to turn the call over to our CEO, Ray Dolan. Please go ahead, Ray.

Raymond Dolan

Thank you, Fran. Good afternoon, everyone, and welcome to our Q1 2011 earnings call. Let me briefly touch upon our numbers, and then I'll let Wayne go into much more detail.

Revenue for Q1 was $67.3 million, down from $83 million in Q4 of last year and up from $62.4 million in Q1 of last year. Our NBS revenue for the quarter was $2.3 million, down from $8.7 million in Q4 and down from $3.1 million in of Q1 of last year. Regarding our NBS-5200 product, during Q1 we booked orders from 8 customers, and we now have a total of 25 trials underway.

This quarter, we recognized substantial revenue from a deal with Bahamas Telecom that was booked in 2008. As Wayne will discuss in a few minutes, this contract included a large percentage of third-party equipment, which drove gross margins for this quarter below our normal levels. This strategic relationship positions us to provide further future products and support to the customer, as their needs continue to expand and develop. The effect of this contract is isolated to the current quarter. To be clear, our gross margin outlook, as well as our revenue and OpEx outlook continue to be in line with the previous guidance we provided on our last call.

Before I hand off to Wayne, I would like to share a few observations since my arrival. In just over 6 months, I've had the opportunity to meet with our customers across the globe that represent nearly 80% of our historical revenue base. These discussions reaffirmed the depth of relationships we have with our customers and the trust they've built with us over the years. As we look to expand into new markets and new geographies, it will be these trusted relationships and our expertise in IP networking that will leverage to drive product and service innovation around our customer needs.

During the past 6 months, we've been busy building a world-class organization to drive our success going forward. As I stated on our October call, it really starts with the team and getting the right people and the right seats on the bus. On our last call, I introduced Rajiv Laroia as our CTO. Rajiv brings a great deal of experience to Sonus in the areas of data transmission and wireless communications, as well as speech, image and video compression.

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