MITL

Mitel Networks Corporation (MITL)

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Mitel Networks (MITL)

Q1 2014 Earnings Call

August 29, 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

Kiera Kilkowski - BofA Merrill Lynch, Research Division

Ron Shuttleworth - M Partners Inc., Research Division

Paul Treiber - RBC Capital Markets, LLC, Research Division

Prabh Gowrisankaran

Todd Coupland - CIBC World Markets Inc., Research Division

Presentation

Operator

Good day and welcome to the Mitel Networks First Quarter Fiscal 2014 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Cynthia Hiponia, Investor Relations. Please go ahead, Ms. Cynthia Hiponia.

Cynthia Hiponia

Thank you, Sam. This is Cynthia Hiponia, Mitel Investor Relations, and I'm pleased to welcome you to Mitel Networks' First Quarter Fiscal Year 2014 Earnings Results Conference Call. At 4:05 Eastern time, Mitel published its earnings release through 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 Monday, September 2, 2013. To access the replay, please dial (888) 203-1112 and enter passcode 3811976. Callers outside the U.S. and Canada should dial (647) 436-0148 and enter passcode 3811976. The webcast will also be archived on Mitel's Investor Relations website for 3 months.

Some of the statements made in this presentation, including the information regarding our financial performance targets for the second quarter 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 economic performance, profitability and financial condition, general global economic conditions, our business strategy, plans and objectives for future operations, our industry and 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 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 rate. Actual events for 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 headings 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. With first quarter revenue of $141.6 million and gross margins of 56.6%, Mitel posted solid results with both year-over-year revenue growth and record gross margins. We demonstrated growth in our core IP telephony and UC business and saw continued strong momentum in cloud, with public and private cloud users up 71% year-over-year, to approximately 300,000 users.

We are pleased to achieve these metrics in what is typically a seasonally slow quarter for Mitel and in a quarter which we have been rebuilding our new sales leadership in the Americas. We view this as evidence of both the competitive advantage and solutions and continued execution by the company. In our last call, I outlined our strategy to focus on delivering profitable growth by leveraging the strength of our traditional software-based solutions with its large and growing installed base, while also focusing on growth in the cloud market and the rapid expansion in the contact center space.

Let me update you on the progress in each of these since the last call. In July quarter, for Mitel's core IP telephony and UC products, we posted year-over-year revenue growth based on an improved execution in North America and Latin America. As I detailed on the last earnings call, we hired new sales leadership in the Americas and have begun to see the benefits of the organizational changes we've made. In addition to the new sales leadership in Q1, we also implemented a series of changes to streamline and simplify our overall sales process and align our compensation programs to recognize the growing value of cloud opportunities. We continue to see good progress in our focused channel approach. It's worth noting that revenues from our top 6 channel partners in the first quarter grew a combined 23% year-over-year.

I'd like to take a moment to congratulate Sandy Hill who we appointed last quarter as Vice President of Channel and Distribution Management in the Americas and being recognized by CRN Magazine as a Leading Woman of the Channel. On the customer front, we announced that the Rock and Roll Hall of Fame selected Mitel's flagship MiVoice and MiCollab platforms to deliver our cost effective cutting-edge communications and collaboration solutions throughout the museum. With the strong support of our local Cincinnati-based partner, Warrick Communications, Mitel won this highly competitive opportunity against Avaya, ShoreTel, AT&T and others. It's a great example of when we get a chance to compete head-to-head, we have great success.

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