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Xtera Announces Fiscal Third Quarter Financial Results

DALLAS, TEXAS, USA, Aug. 11, 2016 (GLOBE NEWSWIRE) -- Xtera Communications, Inc. (NASDAQ:XCOM), a provider of high-capacity optical transport solutions, today announced financial results for its fiscal third quarter ended June 30, 2016. Revenue for the third quarter of fiscal 2016 was $5.3 million compared to $16.2 million for the fiscal third quarter of 2015.

“We continue to see strong interest in the market for the increased bandwidth that our Wise Raman™ technology can uniquely provide by extending a network’s reach and capacity. Our backlog at the end of Q3 was approximately $90 million,” said Jon Hopper, Xtera’s President and Chief Executive Officer. “Fulfilling that demand was a challenge in the third quarter given our liquidity challenges. We are actively working with our existing lenders and others to address this issue as soon as possible as well as exploring strategic alternatives. We have engaged Cowen and Company to assist us on these efforts,” said Hopper.

The company's GAAP net loss for the fiscal third quarter of 2016 was $(23.6) million, or $(1.37) per basic and fully diluted share, compared to a GAAP net loss of $(4.6) million, or $(4.38) per basic and fully diluted share, for the third fiscal quarter of 2015. The company's non-GAAP net loss for the fiscal third quarter of 2016 was $(23.3) million, or $(1.35) per basic and fully diluted share, compared to a non-GAAP net loss of $(4.3) million, or $(4.24) per basic and fully diluted share, for the third fiscal quarter of 2015.

A reconciliation of our fiscal third quarter 2016 and 2015 operating results from GAAP to non-GAAP are provided below:

 
Three Months Ended June 30, 2016
(Unaudited, in thousands, except share data)
 
             Stock Based     Amortization of          
    GAAP     Compensation     Intangible Assets     Non-GAAP  
Revenue   $ 5,347     $     $     $ 5,347  
Cost of revenue     19,121                   19,121  
Gross profit     (13,774 )                 (13,774 )
Gross margin     -257.60 %     0.00 %     0.00 %     -257.60 %
Sales and marketing     1,833                   1,833  
Research and development       3,402             269       3,133  
General and administrative     2,849       39             2,810  
Operating Expenses     8,084       39       269       7,776  
Operating loss     (21,858 )     (39 )     (269 )     (21,550 )
Interest and other
  income (expense), net
    (1,777 )                 (1,777 )
Provision for income
  taxes
    2                   2  
Net loss   $ (23,637 )   $ (39 )   $ (269 )   $ (23,329 )
Weighted average shares
  used to compute net
  loss per common share:
  basic and diluted
    17,218,907       17,218,907       17,218,907       17,218,907  
Net loss per common
  share: basic and diluted
  $ (1.37 )   $ (0.00 )   $ (0.02 )   $ (1.35 )
                                 


 
Three Months Ended June 30, 2015
(Unaudited, in thousands, except share data)
 
            Stock Based     Amortization of          
    GAAP     Compensation     Intangible Assets     Non-GAAP  
Revenue   $ 16,170     $     $     $ 16,170  
Cost of revenue     15,082                   15,082  
Gross profit     1,088                   1,088  
Gross margin     6.73 %     0.00 %     0.00 %     6.73 %
Sales and marketing     966                   966  
Research and development       2,772             270       2,502  
General and administrative     1,435       8             1,427  
Operating Expenses     5,173       8       270       4,895  
Operating loss     (4,085 )     (8 )     (270 )     (3,807 )
Interest and other
  income (expense), net
    (524 )                 (524 )
Provision for income
  taxes
    2                   2  
Net loss     (4,611 )     (8 )     (270 )     (4,333 )
Preferred Dividend     (3,337 )                   (3,337 )
Net loss available to common     $ (7,948 )   $ (8 )   $ (270 )   $ (7,670 )
Weighted average shares
  used to compute net
  loss per common share:
  basic and diluted
      1,816,175       1,816,175       1,816,175         1,816,175  
Net loss per common
  share: basic and diluted
  $ (4.38 )   $ (0.00 )   $ (0.15 )   $ (4.22 )
                                 

Conference Call
In conjunction with this announcement, Xtera will host a conference call to discuss its results at 3:30 p.m. Central Time (4:30 p.m. Eastern Time) on Thursday, August 11, 2016.  Interested parties can listen to a live webcast of the conference call by visiting the Investor Relations section of Xtera’s website at http://ir.xtera.com.  Dial in information for the conference call is available by registering at http://dpregister.com/10078845.  The conference call and webcast will include forward-looking information.  A replay of the conference call will also be available on the Investor Relations section of Xtera’s website at http://ir.xtera.com following the completion of the call.

Please visit http://ir.xtera.com for a copy of Xtera’s quarterly report on Form 10-Q, as filed with the Securities and Exchange Commission today.

About Xtera Communications, Inc.

Xtera Communications, Inc. (NASDAQ:XCOM) is a leading provider of high-capacity, cost-effective optical transport solutions, supporting the high growth in global demand for bandwidth.  Xtera sells solutions to telecommunications service providers, content service providers, enterprises and government entities worldwide.  Xtera’s proprietary Wise RamanTM optical amplification technology leads to capacity and reach performance advantages over competitive products.  Xtera’s solutions enable cost-effective capacity to meet customers’ bandwidth requirements of today and to support their increasing bandwidth demand fueled by the development of data centers and related cloud-based services.

For more information, visit www.xtera.com, contact info@xtera.com or connect via LinkedIn, Twitter, Facebook and YouTube.

Forward-Looking Statements

This press release contains forward-looking statements based on Xtera’s current expectations.  All statements, other than statements of historical facts, included herein are forward-looking statements.  The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “would,” “seek” and similar expressions (or the negative of these terms) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.  These forward-looking statements reflect the current views and assumptions of Xtera and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations.  Xtera may not actually achieve the expectations disclosed in the forward-looking statements, and you should not place undue reliance on Xtera’s forward-looking statements.  These forward-looking statements involve risks and uncertainties that could cause actual results or events to differ materially from the expectations disclosed in the forward-looking statements, including, but not limited to, risks related to Xtera’s ability to restructure its debt or obtain waivers under its existing debt; Xtera’s ability to obtain additional capital; Xtera’s ability to continue as a going concern; Xtera’s expectations for the future business and financial performance of the Company; the growing recognition of the importance and adoption of Xtera’s Wise Raman™ technology to solve the capacity and reach requirements of telecommunication and  content service providers as well as enterprises and government entities; the long-term goals and growth prospects for Xtera; Xtera’s success in improving its internal controls and processes; the development of new products that Xtera believes will continue to help its customers expand capacity on their networks; Xtera’s history of significant operating losses; fluctuations in Xtera’s operating results and gross margin; and other factors included in Xtera’s filings with the Securities and Exchange Commission, including its 10-Q filed with the SEC on August 11, 2016.  Subsequent events may cause these expectations to change, and Xtera disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Information

The Company uses certain non-GAAP financial measures in this press release to supplement its consolidated financial statements, which are presented in accordance with GAAP. These non-GAAP measures include non-GAAP net income (loss) and non-GAAP basic and diluted income (loss) per share. These non-GAAP measures are provided to enhance the reader's understanding of the Company's operating performance as they primarily exclude certain non-cash charges for stock-based compensation and amortization of intangible assets which the Company believes are not indicative of its core operating results. Management believes that the non-GAAP measures used in this press release provide investors with important perspectives into the Company's ongoing business performance and management uses these non-GAAP measures to evaluate financial results and to establish operational goals. The presentation of these non-GAAP measures is not meant to be a substitute for results presented in accordance with GAAP, but rather should be evaluated in conjunction with those GAAP results. A reconciliation of the non-GAAP results to the most directly comparable GAAP results is provided in this press release. The non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

   
XTERA COMMUNICATIONS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(In thousands, except share data)  
(Unaudited)  
   
    Three Months Ended June 30,     Nine Months Ended June 30,  
    2016     2015     2016     2015  
Revenue:                                
Products   $ 4,147     $ 14,892     $ 30,125     $ 39,847  
Services     1,200       1,278       4,931       3,805  
Total revenue     5,347       16,170       35,056       43,652  
Cost of revenue:                                
Products     18,182       14,579       45,408       32,944  
Services     939       503       2,685       1,727  
Total cost of revenue     19,121       15,082       48,093       34,671  
Gross profit     (13,774 )     1,088       (13,037 )     8,981  
Operating expenses:                                
Sales and marketing     1,833       966       4,823       3,215  
Research and development     3,402       2,772       9,446       8,198  
General and administrative     2,849       1,435       6,956       4,487  
Total operating expense     8,084       5,173       21,225       15,900  
Operating loss     (21,858 )     (4,085 )     (34,262 )     (6,919 )
Other income (expense):                                
Interest expense     (715 )     (631 )     (1,477 )     (1,917 )
Interest expense, related party           (377 )           (1,056 )
Foreign exchange loss     (1,059 )     484       (1,704 )     (146 )
Other loss     (3 )           (5 )      
Total other expense     (1,777 )     (524 )     (3,186 )     (3,119 )
Loss before income taxes     (23,635 )     (4,609 )     (37,448 )     (10,038 )
Income tax provision     2       2       4       38  
Net loss   $ (23,637 )   $ (4,611 )   $ (37,452 )   $ (10,076 )
Preferred dividend           (3,337 )           (10,011 )
Net loss available to common stockholders   $ (23,637 )   $ (7,948 )   $ (37,452 )   $ (20,087 )
Loss per common share – basic and diluted   $ (1.37 )   $ (4.38 )   $ (2.52 )   $ (11.06 )
Weighted average shares – basic and diluted       17,218,907       1,816,175       14,837,954       1,815,496  
                                 


   
XTERA COMMUNICATIONS, INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
(In thousands, except share data)  
(Unaudited)  
   
    June 30,     September 30,  
    2016     2015  
Assets                
Current assets                
Cash and cash equivalents   $ 614     $ 1,753  
Restricted cash     328       1,120  
Accounts receivable, net     5,198       6,580  
Unbilled receivables     11,263       6,119  
Inventories, net     11,724       10,540  
Deferred cost     5,010       780  
Prepaid expenses and other current asset     1,092       1,185  
Total current assets     35,229       28,077  
Property and equipment, net     3,923       3,399  
Restricted cash     3,476       152  
Intangible assets, net     6,745       7,554  
Other assets     90       90  
Total assets   $ 49,463     $ 39,272  
Liabilities and Stockholders’ Equity                
Current liabilities                
Accounts payable   $ 25,340     $ 13,589  
Accrued compensation and employee benefits     1,178       760  
Deferred revenue     2,966       1,058  
Warranty reserve     2,569       1,735  
Current portion of long-term debt     12,103       10,707  
Other accrued liabilities     14,677       4,966  
Total current liabilities     58,833       32,815  
Long-term debt less current portion           2,133  
Other long-term liabilities     619       631  
Total liabilities     59,452       35,579  
Commitments and contingencies                
Stockholders’ equity (deficit)                
Series A-3 convertible preferred stock, $0.001 par value, Authorized shares: 0 and 40,500,000
  as of June 30, 2016 and September 30, 2015; Issued and outstanding shares:
  0 and 39,663,482 as of June 30, 2016 and September 30, 2015
          40  
Series B-3 convertible preferred stock, $0.001 par value, Authorized shares: 0 and 39,500,000
  as of June 30, 2016 and September 30, 2015;  Issued and outstanding shares:
  0 and 38,589,303 as of June 30, 2016 and September 30, 2015
          39  
Series C-3 convertible preferred stock, $0.001 par value, Authorized shares: 0 and 25,000,000
  as of June 30, 2016 and September 30, 2015; Issued and outstanding shares:
  0 and 19,081,778 as of June 30, 2016 and September 30, 2015
          19  
Series D-3 convertible preferred stock, $0.001 par value, Authorized shares: 0 and 60,000,000
  as of June 30, 2016 and September 30, 2015; Issued and outstanding shares:
  0 and 52,509,212 as of June 30, 2016 and September 30, 2015
          53  
Series E-3 convertible preferred stock, $0.001 par value, Authorized shares: 0 and 120,000,000
  as of June 30, 2016 and September 30, 2015; Issued and outstanding shares:
  0 and 114,679,639 as of June 30, 2016 and September 30, 2015
          115  
Preferred Stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding              
Common Stock, $0.001 par value, Authorized shares: 100,000,000 and 395,000,000 as of
  June 30, 2016 and September 30, 2015; Issued and outstanding shares: 17,224,624 and
  1,936,056 as of June 30, 2016 and September 30, 2015
    17       2  
Additional paid-in-capital     410,421       388,047  
Accumulated deficit     (422,137 )     (384,685 )
Accumulated other comprehensive income, net     1,710       63  
Total stockholders’ equity (deficit)     (9,989 )     3,693  
Total liabilities and stockholders’ equity   $ 49,463     $ 39,272  
                 


   
XTERA COMMUNICATIONS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
(Unaudited)  
   
    Nine Months Ended June 30,  
    2016     2015  
Operating Activities:                
Net loss   $ (37,452 )   $ (10,076 )
Adjustments to reconcile net loss to net cash used in operating activities:                  
Depreciation and amortization     2,264       1,986  
Provision for inventory obsolescence     4,219       1,001  
Provision for loss on contracts     6,639        
Warranty provision     959       769  
Share-based compensation     333       25  
Warrant amortization expense     77       152  
(Gain) loss on disposition of assets     5        
Changes in operating assets and liabilities                
   Accounts receivable     1,357       3,623  
   Unbilled accounts receivable     (5,144 )     (3,014 )
   Inventories     (6,720 )     (2,415 )
   Deferred costs     (4,230 )     (733 )
   Prepaid expenses and other assets     357       (350 )
   Accounts payable     11,837       9,097  
   Other accrued liabilities     3,409       872  
   Deferred revenue     1,982       (2,215 )
Net cash used in operating activities     (20,108 )     (1,278 )
Investing Activities:                
Changes in restricted cash     (2,532 )     378  
Purchases of property and equipment     (996 )     (866 )
Net cash used in investing activities     (3,528 )     (488 )
Financing Activities:                
Repayment of debt     (21,771 )     (27,747 )
Proceeds from debt     20,957       23,847  
Proceeds from issuance of bridge loans           500  
Proceeds from issuance of bridge loans, related party           4,300  
Payment of capital lease obligations     (69 )      
Proceeds from issuance of common stock     21,790       1  
Net cash provided by financing activities     20,907       901  
Effect of exchange rate changes on cash     1,590       141  
Net increase (decrease) in cash and cash equivalents     (1,139 )     (724 )
Cash and cash equivalents at beginning of period     1,753       1,920  
Cash and cash equivalents at end of period   $ 614     $ 1,196  
Supplemental disclosure of cash flow information:                
Cash paid for interest   $ 912     $ 986  
Cash paid for income taxes     2     $ 38  
Noncash investing and finance activities:                
Issuance of warrants   $     $ 264  
Inventory converted to depreciable assets   $ 1,316     $  
                 


Investor Contact:
David H. Allen | +1 408 427 4463 | IR@xtera.com

Marketing & Sales Contact:
Bertrand Clesca | +33 1 45 48 15 67 | marketing@xtera.com

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