Altigen Communications, Inc. Reports 2020 Fourth Quarter and Full Year Results

MILPITAS, CA / ACCESSWIRE / December 3, 2020 / Altigen Communications, Inc. (OTCQB:ATGN), a Silicon Valley based Microsoft ISV and Cloud Solutions provider, announced today its financial results for the fourth quarter and fiscal year ended September 30, 2020.

Full Year Fiscal 2020 Financial Highlights

• Total revenue of $11.8 million, up 11% Year-Over-Year
• Cloud revenue of $7.6 million, up 23% Year-Over-Year
• Operating income was $2.0 million
• Cash and cash equivalents of $6.6 million at September 30, 2020

Fourth Quarter Fiscal 2020 Financial Highlights

• Total revenue of $2.98 million, up 12% Year-Over-Year
• Cloud revenue of $2.1 million, up 30% Year-Over-Year
• Operating income was $632,000

Full Year Fiscal 2020 Financial Results

Net Revenue: For the twelve months ended September 30, 2020, total revenue increased 11% to $11.8 million, in comparison to $10.6 million for fiscal 2020. Revenue consisted of:

• Cloud services revenue of $7.6 million, an increase of 23% compared to fiscal 2019.
• Software assurance revenue of $2.7 million, a decrease of 7% compared to fiscal 2019.
• Software license revenue of $870,000, a decrease of 23% compared to fiscal 2019.
• Professional services and other $610,000, an increase of 42% compared to fiscal 2019.

Gross Margin: Gross margin decreased 440 basis points to 77.0% for the twelve-month period of fiscal 2020, compared to 81.4% in the comparable period last year, driven primarily by higher amortization of capitalized software and acquisition related costs, and to a lesser extent, a shift in our product mix.

GAAP Net Income: GAAP net income for fiscal 2020 was $1.4 million, or $0.06 per diluted share, compared with GAAP net income of $1.9 million, or $0.07 per diluted share for fiscal 2019, primarily due to the impact of (i) a non-cash tax expense of approximately $549,000 related to the Company's income tax rate which differs from its statutory rate primarily due to expired net operating losses and the disallowance of expenses paid with the Paycheck Protection Program ("PPP") loan proceeds, and (ii) litigation-related expenses of approximately $266,000 in connection with the pending CTI claim

Non-GAAP Net Income: Non-GAAP net income for fiscal 2020 was $2.9 million, or $0.11 per diluted share, compared with non-GAAP net income of $2.5 million, or $0.10 per diluted share for fiscal 2019.

GAAP Operating Expenses: For the full-year 2020, GAAP operating expenses increased 8% to $7.0 million, compared to $6.5 million for the full-year 2019. The increase in operating expenses was primarily attributed to litigation-related expenses in connection with the pending CTI claim.

Non-GAAP Operating Expenses: Non-GAAP operating expenses for fiscal 2020 increased 5% to $6.6 million, compared to $6.3 million in fiscal 2019.

Fourth Quarter Fiscal Year 2020 Financial Results

Net Revenue: Total revenue for the fourth quarter was $2.98 million, a decrease of 1% from the $3.0 million reported in the preceding quarter, and an increase of 12% from the $2.7 million reported in the comparable period last year. Fourth quarter revenue consisted of:

• Cloud services revenue of $2.1 million, representing an increase of 5% and 30%, respectively, compared to the preceding quarter and the prior year quarter.
• Software assurance revenue of $647,000, representing a decrease of 1% compared to the preceding quarter and a decrease of 9% year-over-year.
• Software license revenue of $135,000, representing a decrease of 52% and 49%, respectively, compared to the previous quarter and the prior year period.
• Professional services and other revenue of $115,000, representing an increase of 9% compared to the preceding quarter and an increase of 32% year-over-year.

Gross Margin: Gross margin in the fourth quarter of fiscal 2020 was 77.2%, compared to 77.4% in the preceding quarter, and compared to 80.3% in the prior-year quarter. The year-over-year decrease was primarily driven by higher amortization of capitalized software and acquisition related costs, and to a lesser extent, a shift in our product mix.

GAAP Net Income: GAAP net income for the fourth quarter of fiscal 2020 was $20,000, or $0.00 per share, compared with GAAP net income of $426,000, or $0.02 per diluted share in the preceding quarter, and compared with GAAP net income of $290,000, or $0.01 per diluted share in the same period of fiscal 2019. Results for the three months ended September 30, 2020 include the impact of the aforementioned non-cash tax expense of approximately $549,000 as well as a litigation accrual in the amount of $78,000 in connection with the pending CTI claim.

Non-GAAP Net Income: Non-GAAP net income for the fourth quarter of fiscal 2020 was $873,000, or $0.03 per diluted share, compared with non-GAAP net income of $767,000, or $0.03 per diluted share in the preceding quarter, and compared with non-GAAP net income of $635,000, or $0.02 per diluted share in the same period of the prior year.

GAAP Operating Expenses: GAAP operating expenses totaled $1.7 million for the fourth quarter of fiscal 2020, compared with $1.9 million in the preceding quarter, and compared with $1.6 million during the same period a year ago.

Non-GAAP Operating Expenses: Non-GAAP operating expenses totaled $1.5 million for the fourth quarter of fiscal 2020, compared with $1.7 million in the preceding quarter, and $1.6 million in the comparable period last year.

Balance Sheet: Cash and cash equivalents totaled $6.6 million at September 30, 2020, compared to $6.1 million at the end of the preceding quarter. Working capital was $4.3 million at September 30, 2020, representing a 29% increase from $3.3 million at September 30, 2019.

Non-GAAP Financial Measures

In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of our core operating performance on a period-to-period basis. The excluded items represent stock-based compensation expense, depreciation and amortization expenses and other non-recurring or unusual items that may arise from time to time that we do not consider to be directly related to core operating performance. We use non-GAAP measures to evaluate the core operating performance of our business and to perform financial planning. Since we find these measures to be useful, we believe that investors benefit from seeing results reviewed by management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by facilitating: (i) the comparability of our on-going operating results over the periods presented and (ii) the ability to identify trends in our underlying business.

The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:

Stock-based compensation expense

Stock-based compensation expense is impacted by the Company's future hiring and retention needs and the future fair market value of the Company's common stock, all of which are difficult to predict and subject to constant change. Furthermore, stock-based compensation expense is generally fixed at the time of grant, then amortized over a period of several years, and generally cannot be changed or influenced by management after the grant. The Company believes that the exclusion of stock-based compensation expense assists investors in the comparisons of operating results to peer companies. Stock-based compensation expense can vary significantly based on the timing, size and nature of awards granted.

Depreciation and amortization expenses

Depreciation and amortization expense includes the depreciation of property and equipment, amortization of capitalized software, as well as amortization of intangible assets. Such expenses are fixed at the time of an acquisition, then amortized over a period of several years. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent non-cash current period expense which vary widely from company to company. Management believes that the exclusion of depreciation and amortization expense provides a supplemental measure of the Company's ongoing operating performance.

Other non-recurring or unusual charges

The Company has excluded certain other expenses that are the result of other, non-comparable events to measure operating performance. These events arise outside of the ordinary course of continuing operations. Given the unique nature of the matters relating to these costs, the Company believes these items are not normal operating expenses. For example, legal settlements and judgments vary significantly, in their nature, size and frequency, and, due to this volatility, the Company believes the costs associated with legal settlements and judgments are not normal operating expenses. The Company believes that the exclusion of such out-of-the-ordinary-course amounts provides supplemental information to assist in the comparison of the financial results of the Company from period to period and, therefore, provides useful supplemental information to investors.

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation. They should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Conference Call

Altigen will be discussing its financial results and outlook on a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. ET). The conference call can be accessed by dialing (877) 407-8031 (domestic) or (201) 689-8031 (international). A live webcast will also be made available at www.altigen.com. To access the replay, dial (877) 481-4010 (domestic) or (919) 882-2331 (international), conference ID #38984. A web archive will be made available at www.altigen.com for 90 days following the call's conclusion.

About Altigen Communications

Altigen Communications Inc. (OTCQB: ATGN), based in Silicon Valley, is a leading Microsoft Cloud Solutions provider, delivering fully managed Cloud-based Unified Communications services based on the Microsoft platform. Our SIP trunk services, enterprise customer engagement and innovative cloud contact center solutions seamlessly integrate with Microsoft Teams to enhance and extend the business communications capabilities for our customers. Altigen's solutions are designed for high reliability, ease of use, seamless integration into Microsoft technologies, all delivered as fully managed cloud services. Our solutions are available through our global network of certified resellers. For more information, call 1-888-ALTIGEN or visit our website at www.altigen.com.

Safe Harbor Statement

This press release contains forward‐looking information. The statements are based on reasonable assumptions, beliefs and expectations of management and the Company provides no assurance that actual events will meet management's expectations. Furthermore, the forward-looking statements contained in this press release are based on the Company's views of future events and financial performances which are subject to known and unknown risks and uncertainties, many of which are outside the Company's control. There can be no assurances that the Company will achieve expected results, and actual results may be materially different than expectations and from those stated or implied in forward-looking statements.

Please refer to the Company's most recent Annual Report filed with the OTCQB over-the-counter market for a further discussion of risks and uncertainties. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. The Company does not undertake any obligation to update any forward-looking statements.

Contact:

Carolyn David
Vice President of Finance
Altigen Communications, Inc.
Phone: 408-597-9033
www.altigen.com

1. The Company's fourth quarter results include a non-cash tax expense of approximately $549,000 related to the Company's income tax rate which differs from its statutory rate primarily due to expired net operating losses and the disallowance of expenses paid with the PPP loan proceeds.

1. During the first quarter of fiscal 2019, the Company performed a section 382 ownership change analysis to determine if there were any limitations on the utilization of its NOLs.
2. Fourth quarter fiscal 2020 financial results include a non-cash tax expense of approximately $549,000 related to the Company's income tax rate which differs from its statutory rate primarily due to expired net operating losses and the disallowance of expenses paid with the PPP loan proceeds. Fiscal 2019 fourth quarter financial results include a non-cash tax expense of approximately $285,000. The tax expense differs from the federal statutory rate of 21% primarily due to an increase in the amount of net operating losses expected to be utilized before expiration.

SOURCE: Altigen Communications, Inc.