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  $ 
         



            

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