Altigen Communications, Inc. Reports Fourth Quarter and Fiscal Year 2021 Results

MILPITAS, CA / ACCESSWIRE / December 7, 2021 / 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, 2021.

Fourth Quarter Fiscal 2021 Financial Results (versus Fourth Quarter Fiscal 2020)

• Net revenue totaled $2.8 million, compared to $3.0 million;

• Cloud services revenue of $2.0 million, compared to $2.1 million;

• Gross margin of 71.4%, compared with 77.2%;

• GAAP net loss and diluted loss per share of $1.2 million and ($0.05), compared to GAAP net income and diluted earnings per share (EPS) of $0.02 million and $0.00, respectively;

• GAAP net loss and diluted loss per share were negatively impacted by non-cash tax-related expense of $1.3 million and $0.5 million, respectively, due to expired net operating losses;

• Non-GAAP net income and diluted EPS of $0.4 million and $0.01, respectively, compared to $0.9 million and $0.03, respectively.

Fiscal 2021 Financial Results (versus Fiscal 2020)

• Net revenue of $11.0 million, compared to $11.8 million;

• Cloud services revenue of $7.6 million, compared to $7.6 million;

• Gross margin was 72.0%, compared to 77.0%;

• GAAP net loss and diluted loss per share of $0.5 million and $0.02, compared to GAAP net income and diluted EPS of $1.4 million and $0.06, respectively;

• Non-GAAP net income and diluted EPS of $1.3 million and $0.05, compared to $2.9 million and $0.11, respectively, resulting from the previously mentioned non-cash, tax-related adjustments during the fourth fiscal quarter of each year;

• Cash and cash equivalents of $6.8 million as of September 30, 2021.

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.

Acquisition-related amortization

Acquisition-related amortization consists of customer relationships recorded in connection with our acquisition of Blue Panda Communications in September 2020. We exclude acquisition-related amortization as we believe the amount of such non-cash expenses in any specific period may not directly correlate to the underlying performance of our business operations.

Gain on forgiveness of PPP loan

Gain on forgiveness of PPP loan has been excluded because this is a one-time forgiveness of debt that is not recurring across all periods, and we believe inclusion of the gain is not representative of operating performance.

Valuation allowance on deferred tax assets

Valuation allowance on deferred tax assets consists of a valuation allowance recorded against certain deferred tax assets where certain strategic decisions associated with our operational improvement initiatives have made it more likely than not that such deferred tax assets will not be realized. We have excluded this charge as we believe the amount of such expense does not directly correlate to the underlying performance of our business operations in the period recorded.

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 (888) 506-0062 (domestic) or (973) 528-0011 (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 #43850. 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 provider of Cloud-based Unified Communications solutions built on Microsoft technologies. Altigen's all software solutions include hosted PBX, enterprise routing and queuing, call recording, and complete omni-channel contact center solutions. We also provide cost-effective integrated SIP communications services in conjunction with our solutions in order to deliver a complete end-to-end, fully managed cloud service for our customers and partners. 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:
Brian Siegel, IRC, MBA
Managing Director
Hayden IR
(346) 396-8696
brian@haydenir.com

ALTIGEN COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands)

		September 30, 2021				September 30, 2020
Cash and cash equivalents		$	6,799			$	6,659
Accounts receivable, net			596				413
Other current assets			145				158
Property and equipment, net			27				44
Operating lease right-of-use			826				875
Intangible assets, net			433				607
Capitalized software, net			1,669				1,804
Deferred tax asset			6,597				7,905
Other long-term assets			45				30
Total assets		$	17,137			$	18,495
Current liabilities		$	1,932			$	2,936
Long-term liabilities			736				907
Stockholders' equity			14,469				14,652
Total liabilities and stockholders' equity		$	17,137			$	18,495

ALTIGEN COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)

		Three Months Ended								Twelve Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Net revenue		$	2,794			$	2,977			$	10,990			$	11,772
Gross profit			1,996				2,299				7,916				9,069
Operating expenses:
Research and development			1,108				670				3,848				2,636
Selling, general & administrative			817				919				3,775				4,118
Litigation			-				78				313				266
Operating income (loss)			71				632				(20	)			2,049
Gain on extinguishment of PPP Loan (1)			-				-				804				-
Other income			-				7				-				29
Net income before provision for income taxes			71				639				784				2,078
Income tax benefit (expense) (2)			(1,264	)			(619	)			(1,275	)			(632	)
Net (loss) income		$	(1,193	)		$	20			$	(491	)		$	1,446
Per share data:
Basic		$	(0.05	)		$	0.00			$	(0.02	)		$	0.06
Diluted		$	(0.05	)		$	0.00			$	(0.02	)		$	0.06
Weighted average shares outstanding:
Basic			23,556				23,003				23,279				22,960
Diluted			25,474				25,604				25,232				25,443

1. During the third quarter of fiscal 2021, the Company recorded a non-cash gain on debt extinguishment of $0.8 million related to the forgiveness of the Company's PPP loan which originated during the third quarter of fiscal 2020.

2. The Company's fourth quarter fiscal year 2021 and 2020 results include a non-cash tax expense of approximately $1.3 million and $0.5 million, respectively, related to the Company's income tax rate which differs from its statutory rate primarily due to expired net operating losses.

ALTIGEN COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

		Twelve Months Ended September 30,
		2021				2020
Cash flows from operating activities:
Net income		$	(491	)		$	1,446
Adjustments to reconcile net income to net cash from operating activities:
Impairment of capitalized software			92				-
Depreciation and amortization			28				40
Deferred income tax expense/(benefit)			1,308				548
Amortization of intangible assets			174				166
Amortization of capitalized software			646				325
Stock-based compensation			143				18
Gain from extinguishment of debt - PPP loan			(804	)			-
Changes in operating assets and liabilities:
Accounts receivable and unbilled accounts receivable			(183	)			(42	)
Prepaid expenses and other current assets			13				129
Other long-term assets			(15	)			6
Accounts payable			(11	)			14
Accrued expenses			(135	)			262
Deferred revenue			(176	)			(85	)
Net cash provided by operating activities			589				2,827
Cash flows from investing activities:
Purchases of property and equipment			(11	)			-
Acquisition of intangible assets			-				(378	)
Capitalized software development costs			(603	)			(975	)
Net cash used in investing activities			(614	)			(1,353	)
Cash flows from financing activities:
Proceeds from issuances of common stock			165				24
Proceeds from Paycheck Protection Program Loan			-				804
Net cash provided by financing activities			165				828
Net increase in cash and cash equivalents			140				2,302
Cash and cash equivalents, beginning of period			6,659				4,357
Cash and cash equivalents, end of period		$	6,799			$	6,659

ALTIGEN COMMUNICATIONS, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(amounts in thousands, except per share data)

		Three Months Ended								Twelve Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
	Reconciliation of GAAP to Non-GAAP Gross Profit:
GAAP gross profit		$	1,996			$	2,299			$	7,916			$	9,069
Amortization of capitalized software			154				65				475				217
Acquisition related expenses			43				44				174				166
Non-GAAP gross profit		$	2,193			$	2,408			$	8,565			$	9,452
Reconciliation of GAAP to Non-GAAP Expenses:
GAAP operating expenses		$	1,925			$	1,667			$	7,936			$	7,020
Litigation			-				78				313				266
Depreciation and amortization			5				10				28				40
Amortization of capitalized software			36				31				171				107
Stock-based compensation			49				6				143				18
Non-GAAP operating expenses		$	1,835			$	1,542			$	7,281			$	6,589
	Reconciliation of GAAP to Non-GAAP Net Income:
GAAP net income		$	(1,193	)		$	20			$	(491	)		$	1,446
Litigation			-				78				313				266
Depreciation and amortization			5				10				28				40
Amortization of capitalized software			190				96				646				324
Stock-based compensation			49				6				143				18
Acquisition related expenses			43				44				174				166
Gain on extinguishment of PPP Loan (1)			-				-				(804	)			-
Deferred tax asset valuation allowance (2)			1,264				619				1,275				632
Non-GAAP net income		$	358			$	873			$	1,284			$	2,892
Per share data:
Basic		$	0.02			$	0.04			$	0.06			$	0.13
Diluted		$	0.01			$	0.03			$	0.05			$	0.11
Weighted average shares outstanding:
Basic			23,556				23,003				23,279				22,960
Diluted			25,474				25,604				25,232				25,443

1. During the third quarter of fiscal 2021, the Company recorded a non-cash gain on debt extinguishment of $0.8 million related to the forgiveness of the Company's PPP loan which originated during the third quarter of fiscal 2020.

2. The Company's fourth quarter fiscal year 2021 and 2020 results include a non-cash tax expense of approximately $1.3 million and $0.5 million, respectively, related to the Company's income tax rate which differs from its statutory rate primarily due to expired net operating losses.

SOURCE: Altigen Communications, Inc.

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