Company affirms guidance for the first quarter and full year fiscal 2014

Company targets double digit revenue growth and operating margins for fiscal year 2015

SAN FRANCISCO, CA – Sonus Networks, Inc. (Nasdaq: SONS), a global leader in SIP communications, today is holding a meeting for the investment community in San Francisco, CA.  The Company will provide an overview of the key industry trends driving its business and discuss the market opportunity and strategic initiatives underpinning the Company’s long-term growth.  The Company is affirming its outlook for the first quarter and full year 2014 as provided on February 20, 2014, and is providing additional financial targets for fiscal year 2015.   

Quotes

“Our industry is experiencing a disruptive shift in the way networking has traditionally been delivered,” said Ray Dolan, president and chief executive officer of Sonus.  “Sonus is embracing this change and is deeply committed to delivering an innovative strategy that aligns with the trends around the virtualization of network functions and the cloud.  The strategic role Sonus is playing within this environment underscores our confidence in the financial targets we are providing today.  We look forward to sharing more about our strategy and outlook at today’s investor and analyst meeting.”

Mark Greenquist, chief financial officer of Sonus, said, "2013 was a transformative year for Sonus whereby our Session Border Controller (SBC) growth engine represented more than 50 percent of our total product revenue, and we turned the corner to profitability on a non-GAAP basis.”  Greenquist continued, “This foundation has set the stage for us to accelerate revenue growth and realize greater operating efficiencies. We expect our two most important growth markets, SBC and Diameter Signaling Controllers (DSC), to show continued strong growth in 2014 and 2015.  Our views are supported by independent industry analyst forecasts from Exact Ventures and Infonetics which show an aggregate growth rate for the SBC and DSC markets of between 25-30% for these periods of time.  These strong market trends, coupled with our total revenue shifting predominately to these growth-related businesses in 2014, underscore our expectation to deliver double digit revenue growth and operating margins of approximately 10% in fiscal year 2015.” 

Outlook

The Company affirms its guidance as originally provided on February 20, 2014.  The Company’s outlook is based on current indications for its business, which may change.  A statement on the use of non-GAAP financial measures and a reconciliation of the non-GAAP to GAAP outlook are included at the end of this press release.

First Quarter 2014 Guidance

Full Year 2014 Guidance

2015 Financial Targets

For the first time, the Company is providing targets for fiscal year 2015.  The Company is targeting approximately 10% total revenue growth in 2015 driven by the enterprise and service providers SBC markets and emerging growth in the DSC market.  The Company is also targeting operating margins of approximately 10% in 2015 underpinned by  revenue growth; steadily improving gross margins, which are aided by a mix-shift to more standards-based products and higher software content; and a gradual reduction in operating expenses as a percentage of total revenue.  

Investor Day Agenda and Live Webcast

As previously announced, the meeting will be held today, March 13, 2014, in San Francisco, CA.  The program will include presentations by Sonus President and Chief Executive Officer Ray Dolan and other members of the senior management team. 

The webcast will be available live on the Investor Relations page of the company’s website http://investors.sonusnet.com/.  Presentations will also be available on the website at the conclusion of the morning session.  A recorded replay of the webcast will be available on the same Investor Relations page shortly after the conclusion of the Investor Day.

Investors and analysts not attending the meeting, but who would like to ask a question, can email questions at any time during the presentation to SonusIR@sonusnet.com.

Agenda (All Times Pacific)

Tags

Sonus Networks, Sonus, SONS, Investor Day, Analyst Day, Technology, Internet, Communications, Conference,  IP-based network solutions, SBC, SBC 1000, SBC 2000, SWe, Software SBC, SBC 5100, SBC 5200, SBC 7000, SBC 9000, Sonus DEA, Sonus DRA, session border controller, session border control, session management, diameter signaling, SIP, SIP trunking, Cloud VoIP communications, unified communications, UC, VoIP, IP, virtualization, SDN, NFV.

About Sonus Networks

Sonus helps the world's leading communications service providers and enterprises embrace the next generation of SIP-based solutions including VoIP, video and Unified Communications through secure, reliable and scalable IP networks.  With customers around the globe and over 15 years of experience transforming networks to IP, Sonus has enabled service providers to capture and retain users and both service providers and enterprises to generate significant ROI.  Sonus products include session border controllers, policy/routing servers, subscriber feature servers and media and signaling gateways.  Sonus products are supported by a global services team with experience in design, deployment and maintenance of some of the world's largest and most complex IP networks.  For more information, visit www.sonus.net or call 1-855-GO-SONUS.

Important Information Regarding Forward-Looking Statements

The information in this release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to a number of risks and uncertainties.  All statements other than statements of historical facts contained in this release, including statements in the “Quotes” and “Outlook” sections,  statements regarding our future results of operations and financial position, business strategy, growth in the SBC and DSC markets, plans and objectives of management for future operations and plans for future product development and manufacturing, and statements regarding the impact of the PT transaction on Sonus’ financial results, business performance and product offerings, are forward-looking statements.  Without limiting the foregoing, the words “anticipates”, “believes”, “could”, “estimates”, “expects”, “expectations”, “intends”, “may”, “plans”, “seeks”, “projects” and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions.  Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the timing of our recognition of revenues; economic conditions; our ability to recruit and retain key personnel; difficulties supporting our strategic focus on channel sales; difficulties retaining and expanding our customer base; difficulties leveraging market opportunities; the impact of restructuring activities; our ability to realize benefits from the NET and PT acquisitions; the effects of disruption from the PT transaction, making it more difficult to maintain relationships with employees, customers, business partners or government entities; our success implementing the integration strategies for NET and PT; litigation; actions taken by significant stockholders; difficulties providing solutions that meet the needs of customers; market acceptance of our products and services; rapid technological and market change; our ability to protect our intellectual property rights; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; higher risks in international operations and markets; the impact of increased competition; currency fluctuations; changes in the market price of our common stock; and/or failure or circumvention of our controls and procedures.  These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.  We therefore caution you against relying on any of these forward-looking statements.  Important factors that could cause actual results to differ materially from those in these forward-looking statements are discussed in Part I, Item 1A “Risk Factors”, and Part II, Item 7 and Item 7A “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and “Quantitative and Qualitative Disclosures About Market Risk” in the Company’s most recent Annual Report on Form 10-K. 

Any forward-looking statement made by us in this release speaks only as of the date of this release.  Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.  We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Sonus is a registered trademark of Sonus Networks, Inc.  All other Company and product names may be trademarks of the respective companies with which they are associated.

Discussion of Non-GAAP Financial Measures

Sonus management uses a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, making operating decisions, planning and forecasting future periods, and determining payments under compensation programs.  Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is approved by our board of directors.  Continuous budgeting and forecasting for revenue and expenses are conducted on a non-GAAP basis (in addition to GAAP) and actual results on a non-GAAP basis are assessed against the annual financial plan.  We consider the use of non-GAAP financial measures helpful in assessing the core performance of our continuing operations and liquidity, and when planning and forecasting future periods.  By continuing operations we mean the ongoing results of the business excluding certain costs, including, but not limited to: stock-based compensation, amortization of intangible assets, acquisition-related costs and restructuring.  We also consider the use of non-GAAP earnings per share helpful in assessing the performance of the continuing operations of our business.  While our management uses these non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, GAAP measures.  In addition, our presentations of these measures may not be comparable to similarly titled measures used by other companies.  These non-GAAP financial measures should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool.  In particular, many of the adjustments to Sonus’ financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.                                                                                                     

Stock-based compensation is different from other forms of compensation, as it is a non-cash expense.  For example, a cash salary generally has a fixed and unvarying cash cost.  In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to us is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time.  We believe that excluding non-cash stock-based compensation expense from our operating results facilitates the ability of readers of our financial statements to compare our financial results to our historical operating results and to other companies in our industry.

We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures.  These amortization amounts are inconsistent in frequency and amount and are significantly impacted by the timing and size of acquisitions.  Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that intangible assets contribute to revenue generation.  We believe that excluding the non-cash amortization of intangible assets facilitates the comparison of our financial results to our historical operating results and to other companies in our industry as if the acquired intangible assets had been developed internally rather than acquired.

We consider certain transition, integration and other acquisition-related costs to be unpredictable and dependent on a significant number of factors that may be outside of our control.  We do not consider these acquisition-related costs to be related to the continuing operations of the acquired business or the Company.  In addition, the size, complexity and/or volume of an acquisition, which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs.  We believe that excluding acquisition-related costs facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

In August 2012, we announced that we had committed to a restructuring initiative to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing our worldwide workforce.  In connection with this initiative we have recorded restructuring expense in both 2013 and 2012.  We believe that excluding restructuring expense facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

We believe that providing non-GAAP information to investors, in addition to the GAAP presentation, will allow investors to view the financial results in the way management views the operating results.  We further believe that providing this information helps investors to better understand our financial performance and evaluate the efficacy of the methodology and information used by our management to evaluate and measure such performance.

For more information:

Patti Leahy
978-614-8440
pleahy@sonusnet.com