SONS

Sonus Networks, Inc. (SONS)

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Sonus Networks (SONS)

Q2 2011 Earnings Call

August 02, 2011 4:45 pm ET

Executives

Fran Murphy -

Todd Abbott - Senior Vice President of Worldwide Sales

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

Alex Henderson - Miller Tabak + Co., LLC

George Notter - Jefferies & Company, Inc.

Todd Koffman - Raymond James & Associates, Inc.

Ted Moreau - WJB Capital Group, Inc.

Natarajan Subrahmanyan - TheJudaGroup

Paul Silverstein - Crédit Suisse AG

Unknown Analyst -

Greg Mesniaeff - Kaufman Bros., L.P.

Presentation

Operator

Good afternoon, and thank you for standing by. Welcome to the Sonus Networks' Second 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 introduction. Please go ahead.

Fran Murphy

Thank you, David, and good afternoon, everyone. Welcome to Sonus Networks' Second Quarter 2011 Results Conference Call. We thank you for joining us today. With me on the call this afternoon are Ray Dolan, our Chief Executive Officer; and Wayne Pastore, our Chief Financial Officer. Todd Abbott, our Senior Vice President of Worldwide Sales, is also here to help address your questions at the end of our prepared remarks.

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 cause -- 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-Qs for the quarters ended March 31, 2011 and June 30, 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. So 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. A reconciliation of the non-GAAP to comparable GAAP financial measures is available in the Investor Relations section of our website at www.sonusnet.com. A recording of this call and the instructions for accessing it are available on the Sonus Networks' Investor Relations website.

For more details on our IR outreach plan for the second half of 2011, please feel free to contact me at your convenience.

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. Let me briefly touch upon our numbers, and then Wayne will go into more detail. Revenue for Q2 was $51.8 million, down from $67.3 million in Q1, and down from $61 million in Q2 of last year. The decrease in revenue, both sequentially and year-over-year is mainly a result of orders that we expected to recognize as revenue in this quarter, but have slipped into the third quarter.

Our SBC revenue for the quarter was $7.7 million, up from $2.3 million in Q1 and down from $9.4 million in Q2 of last year. It's interesting to note that for the first time since launching the 5200, customer bookings for this product represented over 50% of our total SBC bookings. While this data point may fluctuate quarter-to-quarter due to the spending patterns of some of our large 9000 customers, we're encouraged by the trend and expect that over time, the 5200 will remain an increasingly material part of our bookings and revenue.

While I acknowledge that our revenue trajectory has yet to develop a healthy linearity, I would like to start this call with a clear message. We remain committed to delivering on our full year revenue guidance and are confident in our ability to grow our business. We recognize that we'll need to deliver stronger-than-normal revenue growth in the second half, but we've entered the second half with the visibility and the momentum required to reach our guidance range of $265 million to $280 million of revenue with $40 million coming from our SBC products, as previously guided.

Our confidence in the strong second half is based on our forecasted new bookings, the general historical strength of our business in the fourth quarter, and importantly, our backlog where we have already scheduled 2/3 of our second half forecasted revenue.

That said, for the foreseeable future, we expect our business will continue to be lumpy due to the cyclical buying patterns and generally large deal size from our service provider trunking customers. To help mitigate this, we continue to invest in expanding our sales coverage in order to more aggressively address high-growth markets such as the SBC market, the vast and as yet largely untapped opportunity with enterprise customers, and the development of our channel business.

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