SUNNYVALE, Calif., Aug. 9, 2011 - ShoreTel®, Inc. (NASDAQ: SHOR), the leading provider of brilliantly simple IP phone systems with fully integrated Unified Communications (UC), today announced financial results for the fourth quarter and fiscal year ended June 30, 2011.
For the fourth quarter of 2011, revenue was $56.5 million, an increase of 10 percent over the third fiscal quarter and 34 percent higher than the fourth quarter of fiscal year 2010. GAAP gross margin for the fourth quarter of 2011 was 65.6 percent compared with 66.0 percent in the fourth quarter of 2010. GAAP net loss was $(1.7) million, or $(0.04) per share, in the fourth quarter of 2011 compared with a net loss of $(3.7) million, or $(0.08) per share, in the fourth quarter of 2010.
Non-GAAP gross margin for the fourth quarter of 2011 was 66.3 percent compared with 66.8 percent in the fourth quarter of fiscal year 2010. The non-GAAP net income in the fourth quarter of 2011 was $1.3 million, or $0.03 per share, excluding $2.9 million of stock-based compensation expenses and $0.2 million of amortization expense related to purchased intangible assets, compared with a non-GAAP net loss of $(1.0) million in the fourth quarter of 2010, or $(0.02) per share, which excludes $2.9 million of stock-based compensation expenses.
For fiscal year 2011, revenue reached a company record of $200.1 million, an increase of 35 percent over fiscal year 2010 revenue of $148.5 million. The GAAP net loss for fiscal year 2011 was $(11.5) million, or $(0.25) per share, compared with a GAAP net loss of $(12.8) million, or $(0.29) per share, in fiscal year 2010. The GAAP net loss in fiscal year 2011 includes $11.2 million of stock-based compensation expense, $0.5 million of amortization expense related to purchased intangible assets, and $0.5 million of other expenses compared with $10.7 million in stock-based compensation expenses in fiscal year 2010.
Excluding stock-based compensation expenses and amortization expense related to purchased intangible assets, fiscal year 2011 non-GAAP gross margin was 67.3 percent and non-GAAP net income was $0.7 million, or $0.01 per diluted share, compared with non-GAAP gross margin of 65.6 percent and a non-GAAP net loss of $(2.4) million, or $(0.05) per share, in fiscal year 2010.
As of June 30, 2011, the company had $105.8 million in cash, cash equivalents and short-term investments and generated approximately $1.3 million in operating cash flow in fiscal year 2011.
“ShoreTel maintained its strong pace of growth and increased its operating leverage during the fourth quarter, returning the company to profitability for fiscal year 2011,” said Peter Blackmore, ShoreTel president and CEO.
“This year the company made significant strides that position us for continued growth in fiscal year 2012. The implementation of a two-tier distribution channel in the U.S. gives us the infrastructure to maintain rapid growth while preserving our ability to deliver world-class customer service. We also increased our sales force by over 40 percent, providing significantly more reach to further expand our market share.” Blackmore added.
“We have built real momentum as we seek to become the leader in unified communications for companies with 50 to 5,000 users. Looking ahead to fiscal year 2012, I am confident that our strategy is the right one to bring us closer to this goal.”
Operational Highlights for Fiscal Year 2011
Expanded Channel Distribution in the United States
ShoreTel Adds Value-Added Distributors in the United States
In January 2011, the company announced it had signed an agreement with ScanSource Communications, a value-added distributor, to distribute its comprehensive line of business communication solutions to certain partners in the United States. This relationship expanded the ShoreTel Champion Partner Program worldwide, and further positioned ShoreTel to continue scaling its business. Additionally, the company also signed an agreement with Westcon Group to distribute its solutions to its U.S. service providers.
ShoreTel Introduces New Versions of its Award-Winning UC Software and Contact Center Solution
During the year, the company introduced two new versions of its award-winning software, ShoreTel 11 and ShoreTel 12, as well as two new versions of its Contact Center solution, ShoreTel Contact Center versions 6 and 7. As always, updates to ShoreTel’s UC software are free to customers on a current support contract.
ShoreTel 12 significantly increased ShoreTel’s ability to scale by increasing the number of users supported on a single instance from 10,000 to 20,000 users. It also provides a full-featured collaborative UC solution with plug-and-play set-up and simplified management capabilities to streamline and enhance business communications for companies of all sizes. Introduced in May, ShoreTel 12 includes the following features: High Definition (HD) audio conferencing, zero-download desktop sharing, XMPP-based Instant Messaging, presence, Microsoft Outlook scheduling and multimedia recording are all integrated in the ShoreTel core platform and available at the user’s fingertips. Also introduced in May, ShoreTel Contact Center 7 strengthens the ease of use and powerful administration capabilities of past ShoreTel Contact Center releases with redesigned Web-based management, enhanced reporting and new diagnostic tools. These features allow enterprises to dramatically improve customer service, while reducing the cost of deploying and maintaining a high-performance and highly available inbound or outbound multimedia call center.
ShoreTel Advances its Mobile Solution
In October 2010 ShoreTel acquired Agito Networks, a leader in platform-agnostic enterprise mobility, for approximately $11.4 million. The Agito solution expanded upon ShoreTel’s existing Mobility solution with the ability to allow users to communicate on any device (desk phone, mobile phone, computer), at any location using any network (cellular or Wi-Fi), simply and cost effectively. The solution further strengthened ShoreTel’s cost-saving proposition by reducing mobile and long distance costs and allowing businesses to use smartphones as PBX extensions.
Notable Accomplishments and Highlights
Strong Share Growth Worldwide and in the U.S.
The company has grown its market share both worldwide and in the U.S. significantly during fiscal 2011. According to the most recently published data from Synergy Research, ShoreTel increased its worldwide market share in the pure IP telephony market from 3.5 percent to 4.5 percent in the quarter ended March 2011. Additionally, in the U.S., ShoreTel’s share of the pure IP telephony market increased from 8.4 percent to 9.1 percent sequentially. With its 6.5 percent market share in the U.S. Enterprise IP telephony market, ShoreTel was the fastest growing major Enterprise IP telephony vendor over the past year.
ShoreTel Awarded Best IP Telephony Provider for Eighth Year in a Row by Nemertes Research
In August, ShoreTel announced it had received the highest ratings for IP telephony products from IT decision makers in the Nemertes Research annual PilotHouse Awards benchmark report. ShoreTel beat out market leaders Cisco and Avaya in all categories, with an overall ranking of 4.32, higher than all other vendors in the survey.
ShoreTel Receives “Strong Positive” Rating in Gartner’s Unified Communications for SMB MarketScope Report
The ShoreTel Unified Communication solution for SMB Offerings received a “Strong Positive,” the highest rating, in a July 2011 Gartner report titled, “MarketScope for Unified Communications for the SMB Market, North America.” -(1) Gartner's MarketScope report provides guidance for users who are deploying, or have deployed, products or services. Per the report, this MarketScope focuses on the premises-based (or infrastructure-based) UC market for SMBs with 20 to 499 employees.
ShoreTel is providing the following outlook for the quarter ending Sept. 30, 2011:
- Revenue is expected to be in the range of $53 million to $57 million.
- GAAP gross margin is expected to be in the range of 65 percent to 66 percent, including approximately $500,000 in stock-based compensation expenses. Non-GAAP gross margin, which excludes stock-based compensation and other charges, is expected to be in the range of 66 percent to 67 percent.
- GAAP operating expenses are expected to be in the range of $40.5 million to $41.5 million, including approximately $3 million in stock-based compensation expenses. Non-GAAP operating expenses, which exclude stock-based compensation expenses, are expected to be in the range of $37.5 million to $38.5 million.
Use of Non-GAAP Financial Measures
ShoreTel reports all required financial information in accordance with generally accepted accounting principles in the United States (“GAAP”), but it believes that evaluating its ongoing operating results may be difficult to understand if limited to reviewing only GAAP financial measures. Many investors have requested that ShoreTel disclose this non-GAAP information because it is useful in understanding the company’s performance as it excludes non-cash charges and related tax adjustments and other non-recurring adjustments, that many investors feel may obscure the company’s true operating performance. Likewise, management uses these non-GAAP measures to manage and assess the profitability of its business and does not consider stock-based compensation expense and amortization charges related to purchased intangible assets, which are non-cash charges, or other non-recurring items in managing its core operations. ShoreTel has provided a reconciliation of non-GAAP financial measures following the text of this press release. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.
Conference Call Details for August 9, 2011
ShoreTel will host a corresponding conference call and live webcast at 2 p.m. Pacific Daylight Time on Aug. 9, 2011. To access the conference call, dial +1-877-874-1570 for the U.S. or Canada and +1-719-325-4904 for international callers and provide the operator with the conference identification number of 7168487. The webcast will be available live on the Investor Relations section of the company’s corporate website and via replay beginning approximately two hours after the completion of the call until the company’s announcement of its financial results for the next quarter. An audio replay of the call will also be available to investors beginning at approximately 4 p.m. Pacific Daylight Time on Aug. 9, 2011 until 11:59 p.m. Eastern Daylight Time on Aug. 17, 2011, by dialing +1-888-203-1112 or +1-719-457-0820 for callers outside the U.S. and Canada and entering the conference identification number of 7168487.
Legal Notice Regarding Forward-Looking Statements
ShoreTel assumes no obligation to update the forward-looking statements included in this release. This release contains forward-looking statements within the meaning of the “safe harbor” provisions of the federal securities laws, including, without limitation, statements by Peter Blackmore, statements regarding future products and statements in the “Business Outlook” section regarding ShoreTel’s anticipated future revenues, gross margins, operating expenses and other financial information. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. The risks and uncertainties include global economic uncertainty, the pace of economic recovery in the U.S., and the impact thereof on information technology spending, the intense competition in our industry, our reliance on third parties to sell and support our products, supply and manufacturing risks, unforeseen development or manufacturing issues, the effectiveness of our new distribution channels, our ability to control costs as we expand our business, and other risk factors set forth in ShoreTel’s Form 10-K for the year ended June 30, 2010, and in its Form 10-Q for the quarter ended March 31, 2011.
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ShoreTel, Inc. (NASDAQ: SHOR) is the provider of brilliantly simple Unified Communication (UC) solutions based on its award-winning IP business phone system. We offer organizations of all sizes integrated, voice, video, data, and mobile communications on an open, distributed IP architecture that helps significantly reduce the complexity and costs typically associated with other solutions. The feature-rich ShoreTel UC system offers the lowest total cost of ownership (TCO) and the highest customer satisfaction in the industry, in part because it is easy to deploy, manage, scale and use. Increasingly, companies around the world are finding a competitive edge by replacing business-as-usual with new thinking, and choosing ShoreTel to handle their integrated business communication. ShoreTel is based in Sunnyvale, California, and has regional offices in Austin, Texas; United Kingdom; Sydney, Australia; and Singapore. For more information, visit www.shoretel.com.
(1)Gartner “MarketScope for Unified Communications for the SMB Market, North America” by Megan Marek Fernandez), July 25, 2011.