Altigen Communications, Inc.
Q2 2021 Earnings Call Transcript

Published: 22 Apr 2021

[Operator:]

Greetings, and welcome to AltiGen Communications Second Quarter Fiscal Year 2021 Results Conference Call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Carolyn David, VP of Finance.

[Carolyn David:]

Thank you, Omar. Hello, everyone, and welcome to AltiGen Communications earnings call for the second quarter of fiscal 2021. Joining me on the call today is Jerry Fleming, President and Chief Executive Officer; and I'm Carolyn David, Vice President of Finance. Earlier this afternoon, we issued an earnings release reporting financial results for the period ended March 31, 2021. This release can be found on our IR website at www.altigen.com. We have also arranged a tape replay of this call, which may be accessed by phone. This replay will be available approximately 1 hour after the call's completion and remain in effect for 90 days. The call can also be accessed from the Investor Relations section of our website.

[Jerry Fleming:]

Thank you, Carolyn, and good afternoon, everyone. Thanks for joining us on today's call. I want to start the call today by providing a high-level overview of our quarterly results, and then I'll follow that with a discussion of our business strategy and expectations. After that, Carolyn is going to provide a detailed review of the quarterly numbers. For fiscal 2021 second quarter, we reported revenue of $2.7 million, down approximately $200,000 versus the same period a year ago. The majority of this drop was due to a decline in legacy product revenue. As we said on prior calls, this was expected as our focus has shifted to a cloud-based monthly recurring revenue model, and our cloud revenue actually increased by 1%. It was an increase versus the prior year quarter. The majority of the revenue and the impact in the quarter largely comes from our small business customers, which have clearly been impacted by COVID due to the challenges many small businesses have faced over the past year. In the second quarter, we also reported non-GAAP earnings per share of $0.01 per share versus $0.02 per share in the year ago period. This was due initially to -- or primarily due to our quarterly revenue decline, but also increased operating expenses due to our acquisition of Blue Panda as well as additional head count expenses as we expanded to prepare for a launch of our new products.

[Carolyn David:]

Great. Thank you, Jerry. Total revenue for the second quarter decreased 8% to $2.7 million despite a 1% increase in cloud revenue. Our legacy products revenue continued to decline as we have moved away from perpetual software licenses and associated software assurance revenue in favor of a cloud-first strategy. We expect our legacy revenue to continue to decrease going forward as we introduce our new Unified Communications as-a-service and Contact Center as-a-service products for Microsoft Teams in the months to come. Second quarter gross margin decreased to 72.8% compared to 75.9% in Q2 last year. The decrease in gross margin was primarily driven by higher amortization costs for capitalized software and to a lesser extent, a shift in our product mix. GAAP net loss for the current quarter was $336,000 or $0.01 per diluted share compared to GAAP net income of $498,000 or $0.01 per diluted share for the same period a year ago. Our Q2 results include a onetime litigation expense of $313,000 related to the settlement of our lawsuit in connection with the CTI claim. On a non-GAAP basis, net income totaled $239,000 or $0.01 per diluted share compared to $630,000 or $0.02 per diluted share in the same period last year. The decrease in non-GAAP income was primarily the result of reduced revenue and higher head count related expenses, which Jerry alluded to earlier. Now let's turn to the balance sheet. We ended the quarter with $6.1 million in cash and cash equivalents, roughly flat in comparison to the preceding quarter. And our working capital was $4 million, down 6% compared to the preceding quarter.

[Jerry Fleming:]

Thanks, again, Carolyn. So to sum up today's call, we are continuing to transition our business away from our legacy software license model to a cloud-first model. As discussed, we have a dual-pronged strategy to drive business growth. First, we plan to take advantage of the tremendous growth in Microsoft Teams with both our current and new end-to-end Teams solutions and services. Second, we are looking to accelerate our business with Fiserv based on many of the same solutions we discussed with Teams, plus several new solutions and services, which will be exclusively sold by Fiserv. I also should point out that anticipation of our business returning to, and in fact, accelerating our growth over the next few quarters, we have retained the services of Hayden IR to assist us in our investor outreach and look forward to continuing to provide updates as our business and strategy evolves. At this time, we can move to Q&A. Operator?

[Operator:]

[Jerry Fleming:]

All right. Thank you, Omar. And thank you, everyone, for participating. We'll be back in touch same time next quarter, and deliver our business update and results. So thank you very much.

[Carolyn David:]

Thank you, everyone.